According to the latest Clear Capital index report, national house price growth in the US is showing signs of moderating, but in spite of this prices have still increased by 11.7% in the 12 months ending in October. Prices in the west of the country showed the largest growth of 19.5% over the past year.
In spite of these impressive yearly growth rates, the national quarterly rates of growth are slowing, and have declined from 3.8% to just 2.1%. Over the last quarter, low-priced tier homes have seen strong moderation in price growth with quarterly increases of 2.5%. This is less than half the gains seen in the previous quarter and is especially significant since this sector led the recovery.
The article in Propertywire goes on to point out that figures showed 11 out of the 15 highest performing metro markets have seen the yearly growth in excess of 20%, while in the lowest performing markets prices remained relatively stable. Just one metro market saw prices declined over the past 12 months, but the fall was only 1.1% which is relatively minor.
Detroit MSA was in the top 50 major metro markets, and saw the strongest quarterly growth of 7.8%. This metro area saw the second highest yearly gains at 31.6%, something that is apparently at least partially due to a substantial decline in REO saturation rates. In 2009 the REO saturation rate reached a high of 64.6%, but this has now declined to just 34.7%. However the median price in Detroit is just $120,000, a little over half the national median price of $210,000, meaning even small price gains will lead to high percentage gains in comparison with more highly priced markets. In markets where prices are still severely depressed, it’s highly unlikely that a bubble will form. In Detroit the median income is nearly half the national median income, and unemployment levels are in excess of 9%. A sustained recovery in house prices will rely on a sustained recovery in the local economy.
Experts analyzing this data point out that even though price gains are starting to taper off as of the summer buying season comes to a close, a moderation in price growth in lower-priced homes points to a healthy recovery in the real estate market. The substantial price growth seen in some markets is likely to be a short-term correction. Even though markets such as Detroit have seen price growth in excess of 30% over the past 12 months, prices are still well below their peak and this growth is merely the response to a substantial price correction.