Clear Capital: Home Prics to See Marked Slowdown

Clear Capital, Reno, Nev., said projected home price appreciation for 2016 shows growth of 1-3 percent, slightly below recent growth rates reflecting a somewhat volatile housing market.  

The company’s Home Data Index Market Report said the 1-3 percent growth rate by January 2017 demonstrates continued market instability and a trend of decreasing rates.  

“While we would love to sugarcoat the HDI data and declare that 2016 merely will be a normalization of the housing market to historical averages not seen since the late 1990s, several factors indicate that it could be another volatile year leading to ongoing uncertainty about the future of American housing,” said Alex Villacorta, vice president of research and analytics with Clear Capital  

The report said while ultimately, overall national growth should be positive throughout 2016, growth rates are “underwhelming” and signal the end of the explosive growth typical of the first half of this decade. The forecast predicts an average of only 0.4 percent quarter-over-quarter growth for each quarter during 2016. This compares unfavorably to the previous two years, when home prices grew by an average of 1.5 percent quarterly.  

Clear Capital said homes in the low tier (selling below $116,000 nationwide) are forecasted to appreciate more significantly than other tiers during the next year, averaging just under 1.0 percent quarterly growth throughout 2016. “By definition, the low tier is affordable to the widest range of potential homeowners and investors,” Villacorta said. “This larger class of buyers will likely cause continued higher appreciation for the country’s most affordable home tier.”  

Instead, Clear Capital said the overall trend of decreasing rates of growth during 2016 should primarily affect the middle price tier, representing the middle 50 percent of all transactions (homes selling between $116,000 and $337,500). The forecast shows a consistent decrease in quarterly growth, falling from 0.5 percent quarterly growth in January to just under 0.2 percent quarterly by the end of the year.  

For the top price tier (homes selling above $337,500 nationwide) the forecast sees relatively consistent quarterly growth, hovering at 0.2 percent quarterly. “Historically, pricing in this class of homes has moved slowly in the sense that gains and losses both have been smaller by percentage due to higher initial prices,” Villacorta said. “The contrast to the low tier highlights the diversity in performance that remains in today’s real estate market.”  

Clear Capital projects the Midwest the fastest-growing region in the country with an average rate of 0.6 percent quarterly growth (2.5 percent annually) over the forecast period, followed by the South (0.5 percent quarterly, 2 percent annually). The Northeast lags behind these regions, projecting an average uptick of only 0.1 percent quarterly and 0.4 percent annually. The story is quite different for the West. In fact, the rapidly accelerating gains prominent in many of the Western metros are projected to level-off entirely in Q2 2016, which will be the first time the region has seen quarterly performance this low since January 2012.  

“The West, which has largely outpaced the rest of the nation in terms of growth in the last several years, is beginning to see market slowing across some of its major metropolitan statistical areas,” Villacorta said. “It remains to be seen how or if the markets will adjust once the typical market rush of spring begins.”