The New York City metro area has been one of the weakest housing markets for the past few years.
But in the last three months, home prices have been surging.
With homebuilders preparing for a “solid spring season,” Bank of America’s Michelle Meyer believes this is an important trend to track.
But the rebound in New York city home prices is just one of the four top topics in housing that investors need to watch.
The New York City metro area has been one of the weakest housing markets for the past few years. But home prices have finally started to recover, with home prices climbing an annualized 18 per cent in the past three months. Excluding distressed properties, home prices were up 21 per cent.
Manhattan home prices are the strongest up almost 11 per cent on the year. These prices are being driven by foreign buyers and investors.
The sale of distressed properties has stayed the same, so Meyer suspects 'that the improvement in prices comes from an improvement in underlying demand, perhaps reflecting improving home price expectations and attractive affordability.'
Multifamily rentals and smaller single-family homes will now create larger part of the housing stock.
Multifamily construction has picked up, with starts tripling from Q4 2009 to an annualized pace of 300,000.
The decline in homeownership after the financial crisis caused homebuilders to increase construction of multifamily homes for rent. Meyer expects homeownership rates to decline further to 63 per cent which should continue to support such construction.
She also expects fewer 'McMansions' and more new single-family properties to be built.
Policymakers will be talking about reducing the role of Government-Sponsored Enterprises (GSEs) like Fannie Mae and Freddie Mac, and the roadmap for a new mortgage finance system.
But consensus is still lacking and 'many Republicans still want an entirely private market, while some Democrats would like a greater government backstop.' A bipartisan group of Senators has drafted the Jumpstart GSE Reform Act. While the legislation is expected to pass Senate, it is likely to be blocked by the House.
Lower inventory, high affordability, lower inventory of distressed homes, and rising home price expectations have been behind the rise in home prices.
Meyer forecasts that home prices will rise 8 per cent this year. She has previously said that a 'positive feedback loop'has begun i.e. when people think home prices are rising, they think they will keep doing so and credit conditions will improve, and this in increases demand for homes.
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