Home prices soar in some areas as buyers opt for more expensive properties
What is it with Middle America? Haven’t folks there heard the country is mired in a deep housing recession?
Apparently not in places like Columbus, Ohio; Detroit; Indianapolis; Kansas City, Mo.; and Milwaukee. Prices in each of those markets rose in the second quarter, according to the latest government figures.
They didn’t just rise, though. They shot up by double digits, as much as 54.5% in Kansas City, almost 39% in Detroit and nearly 28% in Indianapolis from the second quarter last year, according to a survey of the nation’s 32 largest metro areas by the Federal Housing Finance Agency.
Of course, house prices didn’t really soar that much in a year’s time. What’s far more likely is that people in those places and several others bought more than the usual number of expensive properties in the April-May-June period.
But that’s the point. Smack dab in the middle of the worst housing market in decades, people in the nation’s heartland are buying expensive houses — at least expensive for their areas.
Overall, the average price paid for both new and existing houses in the second quarter was higher in 15 of the 32 markets studied. Some markets were up just barely, but they were up just the same.
Alas, prices were lower in the remaining 17 markets. And some of the declines were pretty steep.
In San Antonio, the average sales price sank almost 31%, and it was down more than 15% in the Virginia Beach-Norfolk, Va., area. But again, it is more likely that more sales than normal were notched in the lower price brackets than it is that prices are dropping like targets in a boardwalk shooting gallery.
Still, the gains were large enough to offset the losses. On average, the price of housing nationally rose 1.2% year over year in the second quarter, to $321,800 from $317,900 in 2010.
But would-be buyers should not focus on housing prices, nationally or locally. Rather, said Wayne Yamano, director of research at John Burns Real Estate Consulting in Irvine, buyers should pay attention to the monthly payment, a far more important metric that is “absolutely fantastic right now and highly unlikely to get much better.”
In other words, the wisest home buyers will ignore the cost of the house and consider only whether they can afford the monthly payment.
Buyers also shouldn’t worry about whether prices will continue to fall, Yamano advises, because mortgage rates have only one way to go, which is up. Even a small jump in rates will wipe out any savings buyers might achieve by waiting for prices to drop further.
“The impact of mortgage rates [on monthly housing costs] is tremendous,” the housing consultant said.
If prices remain flat and rates rise a full percentage point, to 5.5% from 4.5%, the same $200,000 house will cost 12% more each month to own, Yamano said. And if rates should spring up 2 percentage points, to 6.5%, your mortgage payment would jump 25%.
Distributed by Universal Uclick for United Feature Syndicate.