Clear Capital has released its Home Data Index (HDI) Market Report with data through August 2013 finding that national annual home price growth picked up to 10.2 percent in August. In mid-2006, the height of the bubble was the last time double digit yearly price growth was reported. However, current yearly gains are different in many ways from the peak. Additionally, the low tier price segment of the housing market saw quarterly gains of two percent, 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 percent to two percent. Regional and metro trends echoed those at the national level, where quarterly and yearly rates of home price growth mostly expanded.
Top performing major metro markets saw average quarterly growth of 3.4 percent. Annualized, the 14.3 percent represents a 7.7 percentage point drop over the current average yearly gains of 22 percent. 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.
“With the continued strengthening of home price trends in August, the need for perspective on market activity is even more important," said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital. “National yearly gains surpassed 10 percent 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."
"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.
"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. And cyclically, we are 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 4.0 percent to 5.0 percent, rather than align with bubble-like growth.
"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,” said Dr. Villacorta.