Home Prices Rise, Home Sales Drop – But For How Long?

real estate dataWith this week’s release of data, as of August 2013, home prices rose at the fastest pace in the past 7 years.  Home prices were up 9% compared to a year ago.  Home prices are believed to be rising due to strong demand by investors and low inventory, which has only risen 6% since the beginning of 2013.  Homes are still affordable compared to the past 50 years because fixed-rate mortgages are still around 4.5%.

As the prices rose, home sales dropped.  In September 2013, pending home sales dropped 5.6%, although the overall rate is still higher than December 2012.  Many factors played an impact in this drop, but higher prices are partially to blame.  Estimates are at least one-third  of home buyers in September were investors.

Despite this decline in home sales, there is still the belief that the housing recovery will continue, with an expected 10% increase in home sales within the year.  According to MarketWatch, rates for 30-year fixed-rate mortgages have declined over the recent weeks, making the upcoming months the perfect time to buy.

How do you believe increasing home prices and declining home sales will affect real estate investing?