Inventory in the most in-demand U.S. metro areas continues to push home prices higher. Research firm CoreLogic's June 2015 home price report revealed home prices grew 6.5 percent between June 2014 and the same time this year. The price increases in June mean the market has seen 40 consecutive months of price growth, and 15 states saw prices hit their highest levels ever.
The rampant appreciation has several causes, but is rooted in declining inventory, particularly the smaller number of distressed homes currently for sale.
Inventory remains low
U.S. Census Data demonstrates that overall inventory of for-sale homes sat at 5.4 months during June. While this represented an increase from earlier in the year, it is still historically low, and the lack of low-priced distressed homes is putting additional price pressure on the market.
"The lack of distressed homes drives up prices."
Distressed home sales hit their lowest point since before the financial crisis during May, and their percentage of the overall housing market is falling quickly. Prior to the recession, distressed sales accounted for 2 percent of the housing market. CoreLogic estimates they will return to that level by 2018. That means prices are likely to continue rising as the amount of low-priced inventory declines.
Mortgage market implications
The increase in prices is accompanied by news that the U.S. homeownership rate has fallen to it's lowest level in nearly 50 years, according to The Wall Street Journal. Despite that, homebuying activity is strong. Some portion of the activity is directly attributable to the economic instability currently affecting China. Speaking with CNBC, Zillow's Director of Economic Research, Svenja Gudell, said that Chinese investors were flocking to the relative stability of U.S. real estate.
Rising prices prices in many areas may push high-net-worth foreign and domestic buyers toward alternative loan products such as the new AltQM™ loans from Impac Mortgage Corp. Correspondent that allow buyers to qualify using alternative means.
With years of experience in correspondent lending, Impac Mortgage Corp. Correspondent specializes in the purchase of residential loans from mortgage bankers, credit unions, community banks and regional banks, including alternative solutions for those who are underserved by traditional lenders.