Moderation Continues with Home Price Gains

Clear Capital has released its latest Home Data Index Market Report, which revealed that national home price gains decreased to 6.7 percent year over year.
Alex Villacorta

Alex Villacorta, Clear Capital

Clear Capital has released its latest Home Data Index Market Report, which revealed that national home price gains decreased to 6.7 percent year over year and 1 percent quarter-over-quarter, for the period ending in November.

These figures represent the 11th consecutive month of moderation. Additionally, distressed saturation fell to just 16.8 percent, suggesting the shortage of lower priced inventory is the catalyst for stalling gains.

“We had the big meltdown in ’07 and what happened as a result of that crash, during that irrational panic, prices went well below where they had been historically, so it wasn’t just a correction of the bubble, but an overcorrection,” Alex Villacorta, Clear Capital’s vice president of research and analytics, told Commercial Property Executive. “At the end of 2011, we saw a strong investor demand fuel home price growth and really an overall confidence in the housing sector all the way through 2013, until it started to taper off. That was a correction to the correction.”

The report shows a lack of demand in the performing-only segment, and this coupled with a dwindling supply of distressed inventory, leaves the future of home prices squarely in the hands of traditional homebuyers, who have yet to show any signs of re-engaging.

“As we look at 2014, we saw these rates of growth really starting to moderate, simply a function of return to normalcy, and that’s the prosperous of what we’re on now,” Villacorta said. “As we turn to 2015 we haven’t really seen this moderation price growth stabilize. In terms of where we see prices going in 2015, we do expect the moderation to continue. Performing-only sale trends are a bellwether for what’s to come for the entirety of the year.”

Looking at national trends, the HDI index showed the West seeing the strongest moderation across the country with its yearly rates of growth falling below 10 percent for the first time in three years, a sure sign of more moderation to come over the next several months.

Excluding distressed sales, performing-only national home price growth over the last year was just 4.4 percent, down from a recovery high of 7.2 percent. According to Villacorta, the report anticipates future losses, as performing-only sale trends indicate that non-investor buyers are not engaged enough to support a moderating recovery. Therefore, quarterly losses could snowball into yearly losses, and create a negative feedback.

“As markets continue to normalize, we’ll see reduced growth from the distressed segment, which is a good thing for the market overall as the legacy of the housing crisis fades in the rear-view,” he added. “Yet, should national rates of growth turn to losses as a result, non-investor homebuyers will likely further disengage.”