Communities in Arizona, California and Florida have seen housing prices shoot up more than 30 percent the past year. The steady escalation of prices in Sun Belt cities and major metro areas has raised fears that a bust could follow the housing boom.
In August, there were just 7,000 properties for sale in the East Valley of Phoenix. By September, that number (of available homes) had doubled. But western land prices continue to grow. In Tucson, Ariz., home prices are increasing by about 3 percent a month.
Rising prices have also raised the issue of how affordable housing is in some parts of the country. The median price of a home in California is expected to reach $575,000 by next year. Only 16 percent of the state’s population can afford a home at that price.
The rise in housing costs may mean new retirement options. With many top southern retirement destinations getting quickly unaffordable in the past five years, some retirees may turn to more affordable regions of the country..
As the housing market continues to boom, one group that can afford the going rates is that of investors. Almost one-quarter of the homes sold in 2004 were purchased by investors.
An unsustainable gain in home prices is known as a housing bubble with the potential risk of popping, resulting in the loss of home equity. With home prices rising strongly in many parts of the country, there has been widespread media coverage on the possibility of a housing market bust. The so-called “housing bubble” has been the focus of numerous reports as prices continue to rise.
But the bubble isn’t likely to pop here. The average price of a house sold in the Peoria area last year was around $119,000, almost $100,000 below the national average.
The local housing market is in excellent shape with a potential for significant housing equity gains, particularly for home buyers who plan to remain in their house for the long term.
While the Peoria area along with about 150 other markets around the country has been found to be a very favorable home price-to-income ratio and even better mortgage servicing cost-to-income ratio, it also has an unfavorable prospect for job growth. Any respectable gains in the local job market will translate into substantial home price gains.
While soaring prices are slowing in some parts of the country, this year is expected to be the fifth consecutive year for record home sales.