Mild quarterly gains likely reflect some pause from buyers who tend to put purchase plans off over the holiday and winter season and in the months to come, some potential buyers get priced out of the market.
Through 2013, national home prices are forecasted to grow by 2.1 percent. The more than 50 percent reduction is expected partly because of a higher starting price base, now a full year into the recovery. At the regional level, there are no surprises in year-over-year growth. The West leads while the Northeast continues to struggle. Market lows made fourth quarter prices look strong, and growth will moderate in the year to come.
“Overall the housing recovery still shows evidence of pushing ahead, as indicated by our December home price trends and 2013 forecasts. Quarterly home prices mostly mirrored those of last month and suggest that some buyers took pause in the initial winter months. Yet, looking back over 2012, national yearly price gains of 4.9% are still strong”, said Dr. Alex Villacorta, Director of Research and Analytics at Clear Capital. “The housing landscape, however, could quickly shift should the broader economy tumble back into recessionary territory. Whether by perception or actual decrease in buying power for the average consumer, residual effects of the fiscal cliff deal could cause housing to change course. But as it stands now, home prices have continued to show resiliency by posting their largest yearly gain in nearly two and a half years.
“2013 should be interesting for the housing market, where national gains should continue to see upward growth but likely at a more modest rate. Keeping in mind our current gains are off market lows at the start of the year, 2013 gains will be measured against a higher price floor after a full year of recovery. On a local level, we expect to see shifts in the status quo for some hot markets, like Phoenix, as some buyer segments get priced out of recovering markets. As those buyers search for opportunities, markets with improving local economies and low price points, like Minneapolis, could become the new targets. At the end of the day, there are still plenty of great deals to be had across the country, investors looking for decent return, and pent up homebuyer demand on the verge of materializing, ” said Villacorta.
The West experienced a continuation of impressive year-over-year growth, up to 11.8 percent in December. The ramp up in gains again reflects a market that was hard hit, and, like national prices, saw its lowest price level at the start of 2012. A forecast of just 2.8 percent for 2013 points to a moderating recovery for the West, as buyers adjust to a higher priced market.
The last time the South saw gains at year’s end was in 2006. So the region’s year-end gains of 4.0 percent marks an overall great year for the South. Only once this year did the region see gains over 4.0 percent, while 2.0 percent price gains are forecasted through 2013.
This time last year, the Midwest saw prices fall by 3.0 percent. Current home prices have notably improved with December prices rising 3.0% year-over-year, just 0.1 percentage point higher than in November. The Midwest’s recovery is forecasted to unfold into 2013, with expected yearly gains of 2.3 percent.
As expected, the Northeast saw the lowest rate of yearly growth among all four regions at 1.5 percent. While it was the first to see minor gains of 0.1 percent in January 2012, the regional recovery never took hold. Yearly price gains only broke out above 2.0 percent once over the year. And more of the same is forecasted in 2013, with yearly gains expected to hit only 1.4 percent.
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Nationally, home prices in December rose 0.9 percent over the rolling quarter, nearly unchanged from November’s quarterly rate of growth of 1.0 percent. National year-over-year price gains picked up steam in December, coming in at 4.9 percent. December’s quarterly trends were mostly flat, indicating potential fiscal cliff and winter impact. Closing the year out just shy of 5.0 percent, December yearly gains, as measured against the market lows at the start of 2012, will likely be a high watermark for the near-term recovery, according to Clear Capital’s Home Data IndexTM (HDI) Market Report with data through December 2012.
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