RealEstateEconomyWatch.com

While extremes continue in some markets, the national trend in Clear Capital’s July data is moderation as markets at both ends of the spectrum stabilize and return to historic patterns. Has the New Normal arrived?

Clear Capital reports that national home prices gained 9.3 percent over the last year and 1.6 percent over the last quarter. Yet national home prices remain 33.4 percent below peak values.

Regional yearly gains were led by the West’s 17.8 percent, while the Northeast trailed with 4.8 percent growth. The Midwest and the South continued to closely track, with yearly gains of 7.5 percent and 7.6 percent, respectively.

The top 15 performing metro markets, exhibited impressive yearly gains, with average growth of more than 20.0 percent. 14 metros posted yearly gains above 15.0 percent.

Las Vegas yearly gains grew to 31.2 percent, the first metro to surpass 30.0 percent since the start of the recovery. Quarterly gains of 4.3 percent, the strongest of all the metros, signal this metro could retain its number one spot over the near-term. While Las Vegas leads the recovery, its median price of $145,000 ranks it below 35 of the top 50 markets. This suggests low price points are in part driving Las Vegas’ gains. Conversely, San Jose has seen gains of 26.0 percent over the year, despite its high median price of $710,000, an indication that demand is fueled by a strong local economy. As such, these two markets will likely see a variance in their trends moving forward.

“While July home prices continue to ramp up throughout the country led by Las Vegas posting more than 30.0 percent yearly growth, let’s not forget a healthy recovery means moderation as the new normal takes hold” said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital. “Over the last half of 2013, we continue to call for a moderation in home price trends. A rising price floor will dampen some potential homebuyers’ appetites, particularly as recent gains bring many markets back into pre-bubble equilibrium. In other words, homebuyers are starting to adjust to the new normal, where steep discounts from the peak are not as attractive as they once were. Having said that, if housing inventory continues rising, it should help alleviate some of the recent pressure on prices, as well as homebuyer’ confidence in the market’s health overall.

“After these shifting fundamental drivers shake out, we expect the recovery to continue at a healthier and more sustainable pace. Certainly Las Vegas is the strongest example of a market that is really hot, with yearly growth of 31.2 percent. While these gains are a nice pick-up off the price floor, they will not last over the long term. We expect most of the major markets across the country to follow the path of sharp upward corrections in the short term, followed by moderating gains as markets fall back in line with their long run levels. Phoenix, for example, is now seeing quarterly growth that supports a yearly growth rate more in line with 10.0 percent, as opposed to the current yearly gains of 23.3 percent. The exact timing of this moderation will vary market by market. In Detroit, for example, given the current uncertainty in the municipal finances, it will likely be some time before REO saturation subsides to a level more in line with national rates and prices bounce back in a meaningful way. While Detroit has struggled with high levels of distressed activity since the housing market collapse, the recent financial developments for the metro will likely serve as another hurdle. Big picture, though, the housing market overall is in a great position and likely to continue to improve. All the more reason we must continue to observe performance market by market. What holds true for Las Vegas doesn’t hold true for Detroit, let alone San Jose,” said Villacorta.

The lowest performing metros saw only two out of 15 post quarterly losses, with prices declining less than 1.0 percent for each. Average yearly gains for the group rest at 3.0 percent, evidence that the more active spring and summer buying season have helped buoy most major markets’ home prices. See our chart of July’s bottom 15 performing markets.

Detroit home prices have risen 9.6 percent over the last year and while the metro remains on the lowest performing list, its quarterly gains of 1.0 percent are the highest for the group. These gains are particularly impressive against the backdrop of an REO saturation rate of 42.0 percent, more than 27.0 percentage points higher than the national average.

Source: Clear Capital HDI