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It's becoming obvious that due to rising prices and limited housing stock in the West, more construction is going to be necessary in the future.
The news on prices is good and providing further evidence that the U.S. housing market has formed a bottom. In fact, it appears now that a small bubble in prices may be developing in the West, with sales moving up moderately from July but flat since last August at the same time that prices are rising more substantially year-over-year.
Here are the two critical paragraphs from the NAR's press release:
The national median existing-home price for all housing types was $187,400 in August, up 9.5 percent from a year ago. The last time there were six back-to-back monthly price increases from a year earlier was from December 2005 to May 2006. The August increase was the strongest since January 2006 when the median price rose 10.2 percent from a year earlier.
Existing-home sales in the West increased 8.3 percent to an annual level of 1.17 million in August but are unchanged from a year ago. With ongoing inventory shortages, the median price in the West was $242,000, which is 16.3 percent higher than August 2011.
In order to address this imbalance between supply and demand, new homes are going to need to get built in the West, and especially in California. That's good news for homebuilders — and the construction workers who were turned out of jobs by the financial crisis and the housing downturn.