No US Housing Bubble Fears

Clear Capital reports that price growth in the U.S. reached 10.2% in August when compared to last year, but experts are confident the high numbers are not indicative …

Clear Capital reports that price growth in the U.S. reached 10.2% in August when compared to last year, but experts are confident the high numbers are not indicative of an oncoming bubble. Analysts remain confident because house prices are still 32% off of their peak highs and that the market has yet to moderate. Gains are still steady and strong, but many experts believe they will taper off before they have a chance to create a bubble, particularly with the onset of the slow season that will likely be accompanied by rising mortgage interest rates. For more on this continue reading the following article from Property Wire.

National yearly home price growth in cities in the United States increased by 10.2% in August, the first double digit growth since the middle of 2006 and the height of the housing price bubble.

The data from Clear Capital, specialist real estate asset valuers also reveals that prices remain some 32% off their previous highs and are actually in line with 2002 prices.

According to the firm this means that there are not currently concerns about a new housing bubble and it points out that the low tier price segment of the housing market saw quarterly gains of 2%, the lowest since April 2012, indicating the sector that kick started the recovery is already on a path of moderation.

From its peak rate of growth in April 2013, rates of growth for the low tier segment, or home sale values in the bottom 25th percentile, have fallen from 4.1% to 2%. Regional and metro trends echoed those at the national level, where quarterly and yearly rates of home price growth mostly expanded.

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Top performing major metro markets saw average quarterly growth of 3.4%. Annualized, the 14.3% represents a 7.7% drop over the current average yearly gains of 22%. This current rate of growth marks yet another sign moderation will likely unfold in the near future as the strongest markets position for a cooling, says the firm.

‘With the continued strengthening of home price trends in August, the need for perspective on market activity is even more important,’ said Alex Villacorta, vice president of research and analytics at Clear Capital.

‘National yearly gains surpassed 10% for the first reported time since the peak of the market in mid 2006. Certainly these trends are exciting, particularly against the backdrop of the seemingly endless housing market woes following 2006. It’s been a long, hard road and it’s difficult not to celebrate double digit price growth,’ he explained.

‘It’s important, however, to note a few sub-surface trends that signal these gains will likely subside over the coming months. Average quarterly gains in the top performing 15 major metros signal moderation is already underway, when annualized and compared to current yearly growth,’ he pointed out.

‘Additionally, we see the spread between low price tier and top price tier rates of growth the tightest since the start of the recovery. Considering the low tier price segment of the housing market led the recovery, the cooling in this segment will likely transfer through to the broader housing market,’ he added.

Villacorta also said that when analyzed cyclically, the market is heading out of the busy buying season and into the slower fall and winter months. ‘That’s not to say the recovery is slated to stall, rather growth patterns are likely to return to more historical rates of growth, between 4% to 5%, rather than align with bubble like growth,’ he said.

‘At the end of the day, this is still great news for housing. Today’s housing market is not irrational or out of balance within the broader context of housing trends, but as we learned, sustaining this pace of growth is simply not healthy. Our call for moderation is the next phase of a more mature recovery,’ he concluded.

This article was republished with permission from Property Wire.


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