Experts at CoreLogic believe there is no need to worry about U.S. housing market bubbles or other hitches in the recovery for years to come, based on data from the CoreLogic Case Shiller Home Price Index. The rate of appreciation compared to prior healthy home values puts the market on a fair course until 2017, according to CoreLogic analysts. Some economists go even further, stating that even double-digit growth in many areas that are experiencing some of the most rapid price increases shouldn’t trouble market observers, because those homes are still affordable compared to pre-crisis prices. For more on this continue reading the following article from TheStreet.
Forget all the talk of a housing bubble. The recovery has plenty of momentum behind it, according to CoreLogic.
Home prices rose 7.3% in 2012, the most in seven years, according to the CoreLogic Case-Shiller Home Price Index. Prices are set to rise further in 2013 and beyond. Economists expect the index to rise at an annual rate of 3.9% between the fourth quarter of 2012 and the fourth quarter of 2017.
The rate of appreciation will be clearly slower than 2012. Home prices are projected to rise only 2.5% in 2013. This is decidedly lower than some forecasts that call for a 7% to 8% rise in 2013.
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There have been growing concerns of a housing bubble as some metros such as Phoenix and Las Vegas have reported double-digit price gains.
But CoreLogic Case-Shiller economist David Stiff does not believe the kind of gains that have been recently witnessed will continue throughout the year.
Stiff says market supply/demand dynamics will likely shift during the year, as rising home prices lead sellers still waiting on the sidelines to list their homes and as new construction picks up.
"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," he adds. "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," he noted.
Still, given that markets such as Phoenix have been rising due to investor demand, home prices could be volatile, Stiff admits. If investor demand slows, it is not clear that demand from home buyers would take its place, given tight mortgage credit conditions.
This article was republished with permission from TheStreet.