Across the US, home prices surge

A sudden rise in property prices across the US has caught almost everyone in the business by surprise.

In the California city of Sacramento, median sales price has surged 15 percent over the last year. They have risen by 7.3 percent across the nation over the course of 2012, according to Standard and Poor’s.

US property market

US property market

For builders, the price rises are a blessing in disguise as many are now scrambling to ramp up production but face delays because of the difficulty of finding construction workers and obtaining planning permission from suddenly overwhelmed local authorities. At the same time, homeowners — many of them lifted out of negative equity for the first time in years — remain reluctant to sell, either because they want to wait and see how much further prices will climb or because they are afraid of being displaced in the sudden buying frenzy.

Property inventories across the US listed for sale are at the lowest level since 1999, according to the National Association of Realtors.

Two of the primary causes of why inventories are so low are new construction ground to a standstill for several years while investors have purchased most of the backlog of repossessions.

Steady job growth has also put more people back to work creating more favourable buying conditions for those who may have put off buying. Very low mortgage rates have also made buying affordable for many.

For the builders who survived the collapse, many are now preparing to kick-start long idle equipment and ramp up production.

Government statistics show that planning permission applications surged in February to their highest level since June 2008, an increase of nearly 34 percent from a year earlier. But the lack of skilled construction workers is likely to be limiting factor on how many new homes are actually completed, keeping pressure on prices for some time to come.

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