WSJ: Supply Squeeze Juices Home Prices Higher
According to an article in the Wall Street Journal on August 8, 2012, home prices rose by their largest percentage in at least seven years during the second quarter. This rise was fueled by a number of factors: low inventories of properties for sale, sustained high demand for bargain-priced foreclosures, and continued record low interest rates. Presently, the number of properties for sale on the market is down sharply from a year ago.
According to the data firm CoreLogic, prices rose by 2.5% in June from a year ago, and by 6% from the previous quarter, which represents the largest quarterly jump since 2005.
The article also cited that Freddie Mac reported that home prices during the second quarter jumped by 4.8% from the previous quarter, the largest jump since 2004. This obviously was very welcome news, and helped lift Freddie to a $3 billion profit, its best showing since the mortgage-finance company was taken over by the U.S. government four years ago.
The main force behind the home-price gains appears to be a shortage of homes for sale. Meanwhile, demand is up, as mortgage rates have dropped to their lowest levels in at least 60 years.
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