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A decade of growth for housing

The housing market continues to grow and expand, according to most economists. At this rate, market activity this year may be the best in the past 10 years.

“The residential real estate market, now at its midpoint in 2015, is on track for its best year since the peak of the housing bubble in 2006,” said economist Jonathan Smoke with the National Association of Realtors. “But this time it's not a housing bubble.”

Loan demand is surging due to fear of rising rates. That's because job growth is fueling the most recent climb in demand for homes. More than 3 million jobs have been created in the past 12 months.

As job growth increases, demand has followed. Homes are selling more quickly. The median age of inventory from homes on the market nationwide in May was 66 days — eight days faster than last year. Some markets are even seeing inventory move in just 18 to 45 days.

“A rapidly declining age of inventory signals that demand is growing more rapidly than supply,” Smoke said, as quoted in the NAR report. “Indeed, we've had 32 months in a row of existing-home inventory at less than a six months' supply. That's why we're also seeing above-normal price appreciation.”

At the real estate market's current level of growth, total home sales this year could near 6 million, which is near the peak seen in 2006, Smoke notes.

Q. Are existing-home sales rising?

A. Yes, sales are nearly at a six-year high. Fueled partly by an increase in the share of sales to first-time buyers, existing-home sales increased in May to their highest pace in nearly six years, according to the National Association of Realtors.

Led by the Northeast, all major regions experienced sales increases in May. Total existing-home sales, which are completed transactions that include single-family homes, townhouses, condominiums and co-ops, rose 5.1 percent to a seasonally adjusted annual rate of 5.35 million in May from an upwardly revised 5.09 million in April.

Sales have now increased year-over-year for eight consecutive months and are 9.2 percent above a year ago (4.90 million). Lawrence Yun, NAR chief economist, says May home sales rebounded strongly following April's decline and are now at their highest pace since November 2009 (5.44 million).

Q. Is a housing boom coming?

A. Here's an interesting view on that subject by John Burns, a noted real estate consultant:

“If you want an industry with a great long-term outlook, consider construction. I have run the math. Even with the most conservative of assumptions, household formations will boom over the next 15 years, and we will need well in excess of 1.5 million homes built per year to meet the demand.

“That is 50-percent more than we built last year. All of my builder clients tell me there is a huge shortage of talent — both blue collar and white collar.

“Look at the U.S. population today … Those born between 1989 and 1994, who are currently 21 to 26 years old, are the largest five-year cohort out there.

“Yes, their struggles to gain full-time employment at a fair wage and to pay off student debt have been well documented. What has not been sufficiently documented is that the majority of them will still leave the nest, marry, have children and need a place to live.”

Q. Are there hidden costs in being a homeowner?

A. There are expenses that some owners might consider hidden. Homeowners say the most stressful part of owning a home are the extra or hidden costs. That may be because homeowners can pay more than $9,000 in hidden and home maintenance costs every year, according to a new analysis by Zillow.

To help first-time buyers better plan for the expenses associated with homeownership, the study calculated several unavoidable hidden costs like property taxes and insurance, as well as five common outsourced maintenance costs, like yard care and carpet cleaning, for the nation and across 15 metros.

Nationally, homeowners pay an average $6,042 per year in unavoidable hidden costs, which include homeowners insurance, property taxes and utilities.

• Email Jim Woodard at storyjim@aol.com.

© 2015, Creators

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