Home Prices are Rising, and So Are Sales

Spencer Parsons

Home Prices Are Rising, and So Are Sales

During our nations most recent recession, the real estate market and overall home ownership were two of the main contributing factors to the slight downfall of our economy. For this assignment, I found an article written in The New York Times by Shaila Dewan, who discusses the recent trends of average home prices and sales and how they are continuing increase. Throughout the article she gives several examples within our economy that are positively influencing our nation’s real estate market.

One aspect of our economy that the real estate market is benefitting from is the improving job market within our country. During the recession, there was an increase in the fixed mortgage rates, which decreased consumer spending on Wall Street and within our consumer markets. Our improving job market has the ability to increase overall GDP within our country because more people will be able to find jobs and make an income and evidently put money back into our economy. The stock market would see positive effects from our improving job market because there will be an increase in investments for companies that deal with home construction and the real estate market. The overall increase in prices of houses helps reduce or even eliminate the possibility of someone owing more money on their mortgage than the overall worth of their home or property.

 In the article, Dewan also discusses an alternative view as to why our real estate market is benefitting the economy. The recession halted consumer spending in our economy causing our housing market to dwindle because of the absence of new homes being built. Since there were so few homes built a couple years ago, the construction companies are really benefitting because the demand for new homes is back on the rise. The demand for the services of construction companies is fueled by the low supply of new up to date homes floating throughout our real estate market. “Inventories are low for both new and existing homes, as well as for rentals, said Stuart Miller, the chief executive of Lennar Corporation, the nation’s third-largest home builder, which on Tuesday reported a 53 percent rise in revenue in the second quarter of the year” (NYTimes, Dewan). This is an extremely large increase in the demand for the services of construction companies and just goes to show how our real estate market is recovering very strong. A common misconception that was brought to light in this article is with such a dramatic increase in home construction, mortgage rates would naturally increase to take advantage of the flow of consumer spending. This however was disproved because the expected rate is 4 percent by the end of the year, which is still much lower than historical norms. Besides, a recent college graduate who is looking for a place to live in Boston said, “she was much more concerned about finding an affordable price than about rising mortgage rates” (NYTimes, Dewan).

Dewan, Shaila. "Home Prices Are Rising, and So Are Sales - NYTimes.com." The New York Times - Breaking News, World News & Multimedia. The New York Times, 25 June 2013. Web. 25 June 2013. <http://www.nytimes.com/2013/06/26/business/economy/home-sales-are-rising-and-so-are-prices.html?ref=economy&_r=0>.