Over the past two years, home values have plummeted to pre-2003 levels. Now, certain markets within the country are starting to stabilize.
According to the latest results from the Standard & Poor’s Case-Shiller Home Price Index, released last week, 19 of the 20 U.S. metropolitan areas surveyed show an improvement in their annual rates of return; 17 of the metropolitan areas saw price increases from July to August.
And in September, sales of existing homes increased to 5.57 million units, up 9.4% from the previous month, according to the National Association of Realtors.
"We’ve already seen immediate signs of a housing recovery," says Ross DeVol, the director of regional economics at the Milken Institute, an independent economic think tank that tracks the housing market. "But things were so depressed that coming off a low bottom could take a long time."
Helping to accelerate the housing recovery are national policies, including a first-time home buyer's tax credit of up to $8,000, and relatively low mortgage rates.
Should the tax credit get extended -- Senate Democrats reached a compromise to do so last week -- it would continue to boost home sales, says Mark Zandi, the chief economist at Moody’s Economy.com. (Zandi said he thinks the full credit will remain in place through April.) Meanwhile, the Federal Reserve, which has been keeping mortgage rates low, is scheduled to end that effort by March, which could temporarily increase demand for homes between now and then.
Of course, housing markets are regional and they vary greatly from one another. Still, there are indicators homeowners can rely on to see whether their home values are about to rise. Here are six:
1. The unemployment rate
It's quite simple: Without a job, you can't buy a home.And as the unemployment rate rises, fewer individuals are capable of purchasing a home. That decreases the demand for homes, which drives prices down. (Currently, to get approved for a mortgage, you'll need to show proof of income, says DeVol.)
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To find a city's unemployment rate, and see whether it's rising or falling, visit the Bureau of Labor Statistics' Web site. The most recent report, from Oct. 28, breaks down the unemployment rates in each state's major metropolitan areas and compares those numbers to the previous year's.
Also, see if local businesses are hiring and if large corporations are moving into the area. More jobs leads to more employees buying homes in the area.
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2. Rising incomes
House hunters who want to dig a little deeper can look at the average or median change in income among households in a neighborhood.At a minimum, confirm that incomes are being adjusted for inflation (or, ideally, rising.) Homeowners who have stagnant or declining salaries may not have much cash left over after they pay their mortgage; as a result, they might not maintain their homes or stay on top of repairs, which could lower a home's value and even the value of neighboring homes, says Zandi.
The Bureau of Economic Analysis (BEA) offers some insight on personal income. Click here and choose tabs labeled "per capita personal income" and "all metropolitan areas" to see how an area's personal income compares to others and to previous years.
A big drawback is that the data released this year ends with 2007 figures. (The BEA will release 2008 data in April 2010.) For state data, click here; the numbers are more current (they run through the second quarter of 2009) and show changes in personal income on a quarterly basis.
Another source is your state’s online employment department (most states have them). State employment sites usually include average salaries for specific occupations in each county.
Continued: Sellers have more leverage
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