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What’s Really Behind the Housing Recovery?

The housing market has shown several consecutive months of improvement in home prices and buyer demand. The housing market—once a downer for the U.S. economy—is now its one bright spot. But why?

A recent TIME magazine article questions what’s really behind the real estate market’s improvement.

Tim Iacano of Iacano Research credits the majority of the recovery and rise in home prices—if not all of it—to the Federal Reserve’s aggressive actions to keep mortgage rates low. The Fed’s quantitative easing (QE) program has prompted mortgage rates to fall to all-time lows in recent weeks.

The lower interest rates have increased home buyers’ purchasing power and boosted affordability.

For example, Iacano points out that a buyer today could purchase a house worth $280,000 and if he’s able to snag a record-breaking 3.3 percent mortgage rate, he’ll have a $1,100 per month mortgage payment.

“Even if mortgage rates moved back up to their 20-year average rate of 6.5 percent (what many thought were simply unbelievable rates when they first dropped that low last decade), that same $1,100 mortgage payment would finance a home purchase of just $193,000, not the current $279,000,” Iacano points out. “The difference between these two prices is nearly 50 percent!”

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The 10 Most Popular Housing Markets

Chicago continues to hold on to the top-spot in January as the most widely searched housing market at Realtor.com. The following are the top searched housing markets from last month, according to Realtor.com data of 146 metro areas.

1. Chicago
Median list price: $186,000

2. Detroit
Median list price: $81,700

3. Los Angeles-Long Beach, Calif.
Median list price: $320,444

4. Philadelphia, Pa.-N.J.
Median list price: $221,995

5. Phoenix-Mesa, Ariz.
Median list price: $169,500

6. Atlanta
Median list price: $150,000

7. Tampa-St. Petersburg-Clearwater, Fla.
Median list price: $142,500

8. Dallas
Median list price: $189,900

9. Orlando, Fla.
Median list price: $155,000

10. Las Vegas, Nev.-Ariz.
Median list price: $121,500

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