Home price growth in the US varies considerably

Home price growth in the United States has softened for a fifth consecutive month with values predicted to normalise in the 5% range by the end of this year.

According to the latest monthly report from real estate data provider Clear Capital, although expectations were high heading into spring, it’s been a decidedly underwhelming season. According to the report good deals do exist, but you need to work harder to find them. Savvy investors with deeper market insight into current market dynamics will be rewarded, the report says.

However, despite a lethargic spring buying season, annual price growth in the 50 major metro markets stands at 22.3% although there is some considerable variation depending on location. Price growth has varied from a fall of 37% to growth of 45%.

There are even large local market variances. For example, in Cleveland the top performing ZIP code area has seen annual growth of 42.3% and the lowest was a fall of 23.3%. But in Rochester, New York, the spread is much narrow with just 4.4% difference between top and bottom.

‘It’s no surprise that the spring buying season isn’t moving the needle this year. The rising price floor in the low tier sector of the market has squeezed investor returns, thereby removing a key demand segment. We don't expect to see a large pop in prices through the summer buying season. 

It's likely we'll keep chugging along at our current pace, somewhere around 1% quarterly gains for the rest of the year,’ said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital.

‘Considering the number of key housing fundamentals that remain stressed, like millions of borrowers still underwater, high levels of student debt, potential borrowers with less than perfect credit, and a job market that is still recovering, we don’t expect a market with waning investor demand to withstand any eye-popping rates of growth. Although it’s not a quick fix to the larger housing problem, home price moderation is really a healthy move for the market overall,’ he explained.

‘While some might be discouraged by a weak spring buying season, we are encouraged that price trends are finally calibrating back to pre-bubble norms. Despite other headwinds, moderating home prices will serve as the foundation to a more balanced market moving forward,’ he said.

‘Remember, we’re still in recovery mode which means deals exist. Market participants just need to look deeper. As softer gains continue to unfold, broad stroke investment approaches will prove less and less fruitful. As such, market participants who pin point investments will be better positioned for success,’ he added.

Property Wire