The price increases that drove the recovery in 2013, wiping out $232 billion in negative equity and prompting millions of owners to sell, may go out with a whimper when the new year arrives, leaving real estate markets with anemic price gains, if any, for months to come.
There is a growing consensus among economists and analysts that the recent slowdown in price increases is not just a seasonal lull, but the beginning of a plateau that could last through the late fall and winter months.
A new analysis by CoreLogic economist Molly Boesel examines the relationship between CoreLogic’s HPI index and list prices in recent months and suggests that, since the asking price for new listings has decreased over the past four months. “If the relationship between new listing prices and the HPI holds, this is an indication that the HPI will also be leveling off,” she wrote in an article released today.
In the same CoreLogic publication, CoreLogic’s deputy chief economist, Sam Khater, found that houses in lower price tiers are a barometer of the overall market. Low-end price changes and levels lead higher end prices by six months to a year. Low-end prices also are much more volatile because buyers of low-tier homes-first-time buyers, investors, and lower income repeat buyers are more sensitive to economic trends than higher end home buyers.
“Clearly lower-end homes prices are decelerating especially in the former boom-bust markets in the Southwest,” Khater wrote, “Current low-end prices are 22 percentage points above higher-end prices, the biggest gap during the past two decades. This indicates that the low-end price corrections over and that overall price growth will be markedly slower heading into 2014.”
The latest price reports on November from realtor.com based on its listings show prices declined 0.7 from to a 6.9 percent year over year price increase. Trulia reported asking home prices rose 1.0 percent month-over-month, the greatest monthly increase in five months. . Clear Capital reported home prices cooled off to a 10.8% year-over-year growth, a slight tapering over the previous quarter’s 11.0% yearly growth. The CoreLogic Pending HPI indicates that November 2013 home prices, including distressed sales, are expected to remain at the same level month over month as October 2013, with a projected increase of 12.2 percent on a year-over-year basis from November 2012. Excluding distressed sales, November 2013 home prices are poised to rise just 0.4 percent month over month from October 2013 and 11.3 percent year over year from November 2012.
“In many ways, 2013 was a transitional year from the uncertain years after the housing bubble to a sustainable long-term recovery characterized by reduced levels of loan delinquencies and foreclosure starts as well as appreciating home values and higher purchase market demand.
Year over year through October 2013, the CoreLogic Home Price Index (HPI appreciated more than 12 percent nationwide. Nationally, prices are now 16 percent above the low in the fourth quarter of 2012. Although price growth has slowed recently, in line with normal seasonal patterns, some deceleration is welcome since 23 states are now within 10 percent of their home price peaks, wrote Anand Nallathambi, CoreLogic’s President and CEO.