CoreLogic said today that home prices are projected
to increase 3.9 percent on an annualized basis between the fourth quarter of
2012 and the same quarter in 2017.
However, a new housing bubble is not likely as market dynamics shift for
both supply and demand. Prices rose 7.3
percent in 2012.
The CoreLogic Case-Shiller Index report notes that
the increase in 2012 was the strongest rate of appreciation in nearly seven
years and projected that prices will continue to improve in 2013 and beyond in
the more than 380 U.S. markets it tracks.
The company's current analysis says that, "Cities at epicenter of housing
bubble/crash are clocking highest rate of appreciation, largely driven by
"Home prices were up in seven out of
every 10 metro areas in 2012. By
comparison, in 2011 prices appreciated in fewer than one-in-five markets," said
Dr. David Stiff, chief economist for CoreLogic Case-Shiller. "We expect strong
buying activity this spring will lead to stabilization of home prices in most
lagging markets, resulting in rising home prices in nearly every metro area by
the end of 2013."
of the cities that were hit the hardest by the housing crash and resulting
foreclosure epidemic are also recovering the fastest. Phoenix saw a year over year price gain of 24
percent, Miami 14 percent, and Las Vegas 13 percent. Dr. Stiff observed that
demand in Phoenix is being driven primarily by investors. As prices rise, the
profitability of investment properties will erode, dragging down investor
areas which have lagged in their recovery saw price declines slow. These included Long Island, (-4 percent),
Virginia Beach, Virginia (-2 percent), and Philadelphia (-1 percent).
CoreLogic said that while the data
point to continuing price appreciation, the overall national rate of home price
increases is projected to decelerate in 2013 from 2012 levels. The CoreLogic
Case-Shiller Indexes project a 2.5 percent home price increase in 2013, as the
market dynamic shifts again in bubble/crash metro areas. While homes in these
markets are still significantly undervalued, the strong investor demand for
foreclosed properties, record levels of housing affordability and other demand
factors that have driven recent double-digit price gains are unlikely to
persist throughout the year.
Price appreciation is also expected
to contribute to an increased supply of available homes as owners who have been
locked into their current homes due to negative equity or were just unwilling
to sell at existing prices begin to list their homes for sale. This will tend to curtail the portion of price
increases that have been fed by unmet demand.
Dr. Stiff tamped down concerns of
another housing bubble. "Even if double-digit price appreciation were to
continue in the former bubble metro areas, there is no reason to believe that
new home price bubbles are forming. That's because single-family homes in these
markets are still very affordable, even after last year's large price gains.
Consider Phoenix, where home prices rose 27 percent since the market hit bottom
in 2011, making it the strongest residential real estate market in the U.S.
Yet, home prices there are still 45 percent below their 2006 peak," Stiff
Stiff said some of the rebounding
areas like Phoenix will likely see price volatility as all cash sales and
investor demand retreat. "It is not
clear if demand from first-time and trade-up buyers will immediately fill the
void," he said, "as mortgage lending standards are still very strict and many
consumers remain risk-averse. If non-investor demand ramps up too slowly, then
recent double-digit price appreciation could decelerate suddenly or even turn
negative for a few months."
The CoreLogic Case-Shiller Indexes,
which include data covering thousands of ZIP codes, counties, metro areas and
state markets, are owned and generated by CoreLogic with supplemental data from
the Federal Housing Finance Administration.