Home prices are heating up again

January's gain was the sharpest since 2006, thanks to tight inventory and low mortgage rates. Is another bubble building?

By Aimee Picchi Feb 22, 2013 4:01PM

Image: Home for sale (© Ingram Publishing/SuperStock)January was a strong month for U.S. home prices, with Zillow (Z) reporting that national home values gained 6.2% from a year earlier. Home prices haven't climbed that fast since January of 2006, during the housing bubble.

But those gains are coming off the steep declines homeowners suffered in the late 2000s. Zillow, which tracks property values, notes that while most markets have already hit the bottom, some areas are still likely see price declines. 

Prices are getting a boost not just from shrinking inventory but also low mortgage rates, which help lure people into considering a home purchase. The benchmark 30-year fixed-rate home loan is still under 4%, compared with 4.16% a year ago, according to Bankrate.com

With some buyers worried that the low rates might be ending, it's spurring them to consider buying or refinancing. 

"A lot of people are saying 'This may be my last chance,' especially people who tried to refinance in the past -- say, a year ago -- but couldn't do it then," WCS Funding mortgage banker Michael Becker told Bankrate.com. 

By a margin of more than 3 to 1, Americans expect the housing market to continue improving over the next 12 months, according to a Bloomberg National Poll.

So, which were the best-performing cities tracked by Zillow? Homes in Phoenix appreciated the most, jumping almost 22% from a year ago. The Arizona city was also one of the worst hit when housing prices collapsed a few years ago.

Other cities enjoying big price jumps are San Francisco (17.2%), San Jose (16.8%) and Las Vegas (16.2%), which was also slammed during the housing bust. 

Only two cities tracked by Zillow saw declines on a month-to-month basis: St. Louis and Orlando. 

Nevertheless, not everyone is convinced the housing price gains are a good thing. David Stockman, the former director of the Office of Management and Budget during the Reagan administration, told Yahoo's Daily Ticker that he believes we're in another bubble.

"We don’t have a real organic sustainable recovery," Stockman said, "because in a world of medicated money by the central bank, things aren’t what they appear to be."

More on moneyNOW


Feb 22, 2013 5:00PM
Home prices are barely starting to recover while we have rock bottom interest rates.  What happens when interest rates eventually go back to their historical norms?  Pretty ironic to think that some  people would shy away from buying a house just because they wouldn't want to pay a 5% rate.  The far-reaching effects of Federal Reserve policy have completely altered reality.
Feb 22, 2013 10:13PM

Nevertheless, not everyone is convinced the housing price gains are a good thing. David Stockman, the former director of the Office of Management and Budget during the Reagan administration, told Yahoo's Daily Ticker that .

"We don’t have a real organic sustainable recovery," Stockman said, "because in a world of medicated money by the central bank, things aren’t what they appear to be."


Thank You Mr. Stockman, I really believe you are correct....time will tell...

Feb 22, 2013 10:20PM
MSN is just doing their job trying to pump n dump before the market really goes to poop.
Feb 23, 2013 2:48PM

Good Job Ronnie B...As long as you are enjoying life and pretty much happy...Great Attitude..!!!


I always wanted to have a nice small cabin 2-3 rooms in a woods, but don't..

Wife kind of  had different ideas..


But we have plenty of woods....And I have a beautiful,high Oak Gove of about 6-7 acres, (about 500 feet from our house) where I could build the cabin.....Someday,someday,someday..... 

Feb 25, 2013 10:35AM
MSN and NBC have got to be joking.  One week articles about the bad home sale market, the next week the opposite.  Garbage reporting.
Feb 25, 2013 10:35AM

Last week 3 of the 7 homes that sold in my zipcode were bank owned. As long as that remains the reality the housing market isn't healthy.

Feb 25, 2013 9:08AM
It's obvious you just lie to have something to do. Houses are not being bought.  No on working to buy them and their is soon going to be yet another flood of foreclosed houses.
Feb 23, 2013 11:10PM
As an investor the only reason to buy real estate these days would be for cash flow. The capital gains and flippers are a long shot. When interest rates return to normal more people will be knocked out of the market.  Real estate could decline again. If you are looking for cash flow income and the numbers work, however if you have no experience you could buy the wrong properties.  You can take this advice to the bank.....LOL
Feb 25, 2013 11:45AM
After listing our home on Friday our agent has already received interest from four potential buyers. He showed the house on Saturday and has two more showings today. I live in the Northeast so it is an encouraging sign that people are looking even in February. Inventory in our town is relatively tight and homes have been selling here. I'm hopeful that I can get the house sold relatively quickly and not take a loss (I have it listed about 25K higher than I bought it about 10 years ago) but we'll see. Things are still tough out there but igns are encouraging here though.
Feb 25, 2013 1:08PM
Unless your job is secure like working for the government or have a large down payment to put down or can find a place dirt cheap, I would not be buying a house. I think Obama is going to crush the economy with higher taxes. Then, the housing market will follow.
Feb 25, 2013 12:44PM
Home prices are heating up... yeah right, where?  In my area all home sales are foreclosures or people selling at very low prices.  Homes here are still below what the original purchase price was and I am not about to lose $50,000.00 or more so will continue making mortgage payments at 5.35% interest.  Another thing, why do banks keep advertising low interest but will not help homeowners who are not behind on their mortgage payments or close to foreclosure.  The government has established a program to help people that are falling behind their mortgage payment but will not assist homeowners who just want to refinance at a lower rate.
Feb 25, 2013 3:05PM
All data is relative to the area you live in. A good market in the southern part of the county I live in is offset by a ok market in the northern area. People need to keep that in mind when they read these types of articles. In markets where they lost 50% of the value of their homes vs. those markets where the prices remain stable. Perspective folks.
Feb 25, 2013 11:14AM
I live in a small town where there are over 20 homes for sale and all are outrageously prices. Home prices are already much too high here and will take a long time to sell. As a rule of thumb when you buy a home on a 30 year mortage,you can take the price of the home,multiply by 3 and thats what youll be paying for that home. If it were not for newly wed people that jump out and pay what ever price is thrown at them homes would never sell. After doing a complete investigation i have found it is a better deal to have your own house built the way you want it and can actually save you money.
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