Home Sweet Home
March 1, 2005
Ask an economist to forecast what the residential real estate market looks like
for the months ahead and you will hear plenty about a moderate increase in
interest rates and avoiding unforeseen setbacks to job growth and the overall
economy. In other words, not many economists care to be overly specific,
especially when asked to name the top markets to watch in 2005.
A gun-shy
economist can be forgiven, however, when you take a look at what happened in
2004. About this time last year, most real estate analysts were saying that as
those alluring 4 percent mortgage rates of the previous two years crept closer
to 6 percent, the market would cool and home prices would plateau. Instead, the
value of an average home in the United States jumped by nearly 13 percent. “It
surpassed any increase we’ve seen in 25 years,” says Armando Falcon Jr.,
director of the Office of Federal Housing Enterprise Oversight (OFHEO), the
government agency that is responsible for tracking housing prices around the
country.
The giddy upturn was even more pronounced in major cities, where
the appreciation rate was closer to 20 percent. And while it is more difficult
to gauge the luxury home market, most data indicate that its values increased at
an even higher rate—in the 30 percent range. The most remarkable increase came
in Las Vegas, where home values in 2004 gained a stunning 41.7 percent over
2003, the highest increase ever measured in a large U.S. metropolitan
area.
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