Clear Capital: West Markets Continue to Dominate Housing

Clear Capital, Reno, Nev., said while most markets showed little change in August home prices, a longer term dip in distressed saturation levels in the West indicates a strong recovery at the expense of overall affordability.

The company’s monthly Home Data Index said nationally, home prices rose by 0.7 percent from July and by 4.8 percent on an annual basis. Regionally, the West easily outdistanced other regions with 1.4 percent monthly growth and 8.1 percent annual growth. The South came back next, with 0.8 percent monthly growth and 5.4 percent annual growth. The Midwest edged up by 0.5 percent monthly and by 3.7 percent annually, while the Northeast barely moved, rising by just 0.1 percent monthly and by 1.3 percent annually.

“While the West has been consistent in its outperformance of the rest of the nation for several years, the underlying composition of sales that are driving the soaring price growth has not matched this consistency,” said Alex Villacorta, Clear Capital vice president of research and analytics. “In the region’s top performing major metro markets, levels of distressed properties have steadily decreased much faster than that of the national average.”

Clear Capital said while the national level of distressed properties is currently 14.5 percent, cities such as Seattle, San Diego, Honolulu and Las Vegas are now below 10 percent. In San Jose, distressed properties make up only 3.0 percent of overall sales in the market.

The report said most performing markets appear to be holding steady since last month’s reporting, with the exception of Honolulu, where growth has sharply increased from 1.2 percent in July to 1.6 percent in August. Tampa, Fla. remains the fastest growing major metro area in the country, with quarterly growth remaining high at 2.5 percent and annual growth at just under 14 percent.

“Quarterly growth in most performing markets across the nation appears to be stabilizing, with few major shakeups month to month,” Villacorta said. “One longer term trend we’ve been keeping our eye on has been the relatively rapid decrease in the distressed saturation levels in top performing western markets. Because distressed saturation levels are one of the key indicators of a market’s overall health, low frequencies of these sales in the market could be a sign of a healthy market.”

However, Villacorta noted as REO and short sale properties become harder and harder to come by in the region, “this could be a signal that affordability is continuing to plummet. This, coupled with an observed rapid increase in price and a potential uptick in interest rates in the near future, may spell trouble for the region in the coming months and years as low tier investors and first time homebuyers are continually shut out of major western markets.”