Clear Capital: More Top Markets Out of Negative Equity As Home Prices Surge

Clear Capital, Reno, Nev., said the number of housing markets with record-high prices continues to grow even as some markets turn negative.

The company’s monthly Housing Market Data Index report said national home prices rose by 0.9% in the fourth quarter, no change from last month. Despite an expected winter slowdown in real estate activity, nationwide annual price growth actually increased by 0.3 percent to 6.1 percent, the highest reported year-over-year price growth since February 2015.

Regionally, Clear Capital said home prices in the Midwest grew by 0.8 percent over the past rolling quarter, a slight decrease of 0.2 percent from 1.0 percent since last month. Price growth in the Northeast increased by 0.2 percent to a quarterly average of 0.7 percent. In the Southern and Western regions of the nation, however, quarterly growth held steady at a 1.0 percent quarter-over-quarter price increase.

“Following several rounds of healthy, peak-season summer growth, winter gains thus far this season have remained relatively healthy across much of the country,” said Clear Capital Vice President of Research and Analytics Alex Villacorta. “And as prices have continued to climb in the long term during the post-housing crash, the large portion of the housing market that has been frozen in negative equity has shrunk significantly–meaning that an increasingly large portion of previously underwater homeowners may now have the option of entering the market.”

Villacorta added while the expected spring housing boost is still months away, “an influx of fresh new demand on the market could further boost growth potential later this year–as long as there are no other shocks to the market.”

The report said the San Jose, Calif. metro area reported negative quarterly price growth for the second time in three months. After a temporary uptick to a neutral rate of 0.0% quarterly price change in January, prices in San Jose fell by 0.3 percent over the past quarter. Hartford, Conn. also experienced negative quarterly price growth, where home prices have too fallen by 0.3 percent since fall.

Most markets, however, grew “at impressive rates for a mid-winter check-in,” Villacorta said. Portland, Ore. is currently the nation’s fastest growing market and has been steadily growing around the 2 percent quarter over quarter mark since last fall. Eight major metro markets grew at 1.5 percent QoQ or higher, compared to only three metro areas above this mark this time last year.

The report said continued, long-term price growth pushed several MSAs to record price highs, with 16 of the nation’s top 50 largest metropolitan housing markets surpassing the peak prices of the housing bubble. Outside of these major markets, dozens of other micro markets are also breaking glass ceilings and selling at record-high prices, accounting for nearly one-third of the total national housing stock. In those markets that haven’t yet reached pre-recession price levels, an additional 5 percent of the national housing stock is less than 5.8 percent–the national rate of price growth in 2016–from surpassing 2006 price levels.

Villacorta said national price growth should moderate in 2017 with annual growth projections in the 2-3 percent range. “However, if growth is anywhere close to the levels we saw in 2016, nearly 40 percent of homeowners nationwide who purchased during the height of the housing bubble could be safely above water by the end of 2017,” he said. “For homeowners who purchased either before or after the record prices of spring 2006, the proportions are even larger.”