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Home | News | Market Studies | Is the Housing Recovery ‘Artificial’? Does It Matter?
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Is the Housing Recovery ‘Artificial’? Does It Matter?

It's no secret investor demand is playing a large part in the current housing recovery as cash buyers contribute to close to one-third of home sales. The question on the minds of many is whether the market is experiencing an ""artificial"" recovery and whether it will last.


""Keefe, Bruyette & Woods, (KBW)"": a New York-based investment banking firm, suggests the question of artificiality is mute because the current recovery will, in fact, last.

""Sure, it may be artificial and in large part driven by high investor purchases and artificially suppressed mortgage rates,"" the firm said in a report.

""But as we see incremental headlines, economists, and analysts starting to factor improving job growth, recovering housing wealth and whiffs of a self-reinforcing housing virtuous circle into their expectations we just get downright giddy,"" the firm stated.


This ""giddiness"" stems from the firm's consensus that these trends will not be short-lived.

The S&P Case-Shiller Home Price Indices recently ""reported"": annual increases of 7.3 percent for its 10-city composite and 8.1 percent for its 20-city composite.

On a more micro level, certain hard-hit markets are leading the price increases, while a few Northeast markets are barely contributing.

KBW labels Atlanta, Las Vegas, and Phoenix as the ""hottest markets."" Home prices in Atlanta have risen 13.3 percent over the past three months and 30 percent over the past year.

Las Vegas home prices rose 8.7 percent in the last three months and 27 percent over the year, and Phoenix experienced an 8.2 percent price gain over the past three months and a 41 percent rise over the past year.

Despite these encouraging gains, KBW points out lower-tier prices remain 50 percent below their peaks prior to the housing crisis.

In the Northeast, home prices are moving sluggishly. New York home prices have risen 0.7 percent year-over-year, and in Boston, prices have risen 4 percent.

KBW finds Denver somewhat of an anomaly as its home prices are just 2 percent from their peak reached in 2006. ""It's an outlier amongst the sampled cities in this regard, having shown one of the shallowest dips yet in one of the stronger recent rebounds,"" KBW said.

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About Author: Krista Franks Brock

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Krista Franks Brock is a regular contributor to and She previously served as managing editor of DS News magazine. Prior to joining DS News, she was managing editor of Southern Distinction, a regional lifestyle magazine based in Athens, Georgia. She is currently a freelance writer and editor for various online and print publications. She holds degrees in journalism and art from the University of Georgia, where she also earned a minor in Spanish.

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