Why Home Prices Need Job Growth

Over the past few years, home price increases have been largely fueled by investors and other home buyers purchasing the discounted housing stock created by the housing crash and foreclosure crisis. As those bargained-priced homes sold, home prices increased. Naturally, the areas that suffered the largest declines following the crash were the ones that posted the largest price gains in subsequent years. But, since there are a declining number of distressed properties available for sale, those areas are now seeing prices normalize. In fact, according to Trulia’s most recent Price Monitor, for the first time in two years, none of the 100 largest U.S. metropolitan areas had a year-over-year price increase of more than 15 percent. While this is good for current home buyers and affordablility levels, a truly strong home price recovery requires consistent job and income growth. According to Jed Kolko, Trulia’s chief economist, without consistent job growth, price gains will slow dramatically or even reverse in markets that have relied heavily on rebounding prices for their recent improvement. More here.

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