Dwindling Housing Supply Continues To Be A Key Driver Of Home Prices

Bloomberg BRIEF recently published its 2012 Review and 2013 Outlook Supplement.

In the report, economist Joseph Brusuelas notes that the dwindling supply of housing is bullish for the continued recovery of the U.S. housing market.  He writes:

Rising purchases of homes from cash buyers and investors reduced the monthly supply of existing homes on the market to 4.8 months in November from 6.4 months in January of 2012. Careful management of foreclosed properties by Fannie Mae, Freddie Mac and the large banks contributed to the improved supply picture in the housing market.

Here’s his chart:

Home prices v. supply

Photo: Bloomberg

Brusuelas acknowledges that negative equity positions pose a continuing threat to the housing market, since those homeowners are unable to take advantage of refinancing at low mortgage rates.

However, he points to price gains in metropolitan areas that were devastated during the crisis, a strong year for housing starts, and the aforementioned lack of housing supply as drivers for a robust, well-performing U.S. housing market and the continued appreciation of home values.

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