Clear Capital: Lower-Tier Home Price Gains Slow

Clear Capital, Reno, Nev., said most housing market home prices maintained status quo in March, but noted a slowdown in home price appreciation in the lowest market tiers, which had buoyed growth over the past several months.

The company’s Home Data Index Market Report said overall national and regional performance was unchanged in March, showing 0.5 percent quarterly growth. Regionally, the West led with 0.9 percent quarterly growth, followed by the South (0.6 percent) and the Northeast and Midwest (0.3 percent).

However, Clear Capital Vice President of Research and Analytics Alex Villacorta noted that lower-tier quarterly growth slowed to just 0.4 percent more than the highest tier, a “significant departure” from the typical pattern on the national level the past several years, where low tier quarterly growth has consistently outpaced the top tier by an average of 1.5 percent, even reaching a difference of 2.0 percent in November 2014.

“As the winter real estate seasonal slowdown seems to be winding down, the numbers through the end of March are somewhat dichotomous,” Villacorta said. “Most of the nation’s top performing markets have seen very little change in performance since last month and have continued to grow throughout the last quarter, despite the winter slowdown in activity. The nation’s lowest performing markets, however, appear to be much less able to resist the effects of the winter slow season even still as quarterly growth continues to decrease.”

As a result, Villacorta said at the ends of the national market, the low and top tiers have begun converging potentially toward a more homogenous pattern of growth. “Although this drop in performance for the low price tier may indicate a more sustainable model of affordability for first time homebuyers, it may also plant doubt and uncertainty, especially with the investors–such as the REO to rental investors–who have previously taken advantage of the rapid growth of the tier,” he said. “Even as price growth for all tiers remains in the black, it may be time for investors to find a new niche in the industry. Perhaps we will see REO or rental investments take a rise.”

The report noted while the nation’s top markets held fairly steady, many of the lowest-performing markets saw decreases in quarter-over-quarter growth through the end of March. Quarterly growth for Boston fell to -3.6 percent, down an additional 1.7 percent since last month. The next four lowest performers (Rochester, N.Y., Memphis, Tenn., Milwaukee, Wis. and Birmingham, Ala.) also saw downticks in quarter-over-quarter growth, each falling by 0.2 percent.