It’s something that everyone has been waiting for. A bona fide fact that the economy has fully recovered from the doldrums of the last decade. Yet today while no trumpet announcing such a recovery sounded, one sign of economic improvement was real estate investmentsreleased today by S&Ps Case-Shiller home price index (1). How so? In August, the year over year price index increased by 12.8 percent. That’s the biggest year over year gain since the heydays of 2006. Is that good news or is that bad news?

Certainly a recovery in home values is a solid plus, especially for the real estate investor who has been picking up bargains over the previous few years, but is the pace of growth too fast? Let’s look at a few of the more familiar names in the housing crisis who always seem to be in the news when it come to home prices.

Las Vegas for example, experienced an increase in home values from August 2012 to August 2013 with a 29 percent jump in price. Isn’t that the type of bubble that contributed to the housing debacle? Maybe, but prices in Las Vegas are still 40 percent lower than their highest in the last decade. Miami and Phoenix also experienced significant year over year gains but are still 35 percent below their historic highs. What can we glean from that?

The first tidbit is the realization that wow, home prices really did slide hard and fast and particularly so in the western regions. And the next? That the markets are starting to recover but recover either with cash buyers or qualified home buyers. Gone are the days when anyone could get a home loan, default, then go buy another. Today’s buyers have good credit, verifiable income and a down payment. The bursting bubble of 2007 was in part due to an influx of dubious borrowers. Today, those individuals are on the outside looking in.

 

  1. CNN/Money.com http://tinyurl.com/p38bowt