Fitch: U.S. Home Price Growth Diverging on Coasts

Fitch Ratings, New York, noted disparate home price growth on the U.S. coasts, with income growth the main factor behind the disparity.

The company’s quarterly U.S. Sustainable Home Price Report noted San Francisco’s home price have risen by 15 percent since 2006; New York, on the other hand, has seen home prices fall by 13 percent from the same period.

Fitch Director Samuel So said the disparity “is very much a tale of two cities, with the threads tying them together yielding very different conclusions.” He said both cities are major metropolitan areas on the coast with a limited ability to add new housing inventory.

What caused the difference? “A main driver is income growth,” So said. “San Francisco’s growth has roughly doubled that of New York’s in recent years. After hitting their respective bottoms with regard to home prices, income has increased 21 percent in San Francisco while only growing 11 percent in New York.”

Post-crisis distressed inventory also marks a notable difference, Fitch said. In San Francisco, for instance, inventory increased rapidly from early 2007 until early 2010 before resolving relatively quickly and returning to pre-crisis levels by 2014. By contrast, New York’s distressed inventory remains very high–three times higher than the level in 2007.

“What’s more, high inventory is likely to weigh heavily on New York’s housing market until well into 2018,” So said. “A primary driver of this contrast is foreclosure laws. In California, foreclosure sales can be initiated without having to file a lawsuit or go to court, actions which are required in New York.”