Everyone was calling a housing bottom about a month ago, and there’s finally some data to back up the claims.
A new report from Zillow revealed that national U.S. home prices increased year-over-year for the first time since 2007.
Of course, the rise wasn’t all that mind-blowing at a paltry 0.2%, but the housing market wasn’t able to pull off such a seemingly small feat for five years.
So it means something, maybe.
Is It a Blip or Meaningful?
The data is based on home values from the second quarter of 2011 to the second quarter of 2012, and if the recent surge in home buying is any indication, the third quarter numbers should be even better.
[Housing Market Update: Floodgates Officially Open]
In a press release, Zillow Chief Economist Dr. Stan Humphries said, “it seems clear that the country has hit a bottom in home values,” thanks to four months of solid gains.
During the second quarter, national home prices jumped 2.1%, with Phoenix leading the country with an impressive, if not troubling, 6% gain.
In fact, home prices are up 12.1% in Phoenix since the second quarter of 2011!
Other winners include the Miami-Ft. Lauderdale metro, which saw a 4.7% gain, and San Jose, where home prices increased 3.7%.
So it looks as if a lot of the hardest hit regions of the country are finally bouncing back to some degree. Even Las Vegas saw prices rise 2.5%, though they are still down 2% year-over-year.
However, one major metro, Philadelphia, still hasn’t bottomed, though it is expected to by year-end.
Aside from Zillow, a lot of big pundits and investment bankers are getting on the housing train as well, so could it be for real this time?
Still Lots of Risk to Housing Market
Humphries warned that there is lingering risk, thanks to foreclosures picking up steam and increasing inventory, which currently remains very tight in highly-sought after regions of the country.
Still, he expects most of the new inventory to get absorbed, thanks to more positive sentiment from consumers regarding housing.
But the big question remains whether there are enough qualified buyers (those who can actually obtain financing) to scoop up the homes as they come on the market.
Clearly there are a ton of former homeowners who aren’t eligible, thanks to their newly damaged credit. And then there are the many unemployed, who also can’t qualify.
This should subdue any tremendous gains in the near future, pointing to a slow, if not choppy, housing recovery.
There’s also the economy at large, which took another turn for the worse this week as European fears grew stronger. There’s even talk of another recession. Yes, it’s ugly out there.
So don’t expect to make millions in housing overnight. In fact, you might even see your new home purchase fall in value if this recent rally doesn’t hold, which makes you wonder if the low mortgage rates are a home buyer trap. But if you buy and hold, and exercise patience, you should be rewarded.
Read more: Is a 30-year fixed in 2% range possible?