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Clear Capital: Tax hike could stall housing appreciation

U.S. home prices in November edged up only 1% from October as the real estate market began to cool on news of an impending fiscal cliff and financial uncertainty, Clear Capital said.

The Truckee, Calif.-based analytics firm says a tax hike on Americans could stall home price gains if potential homebuyers are forced to rent because of tightened personal budgets. Clear Capital noted home price gains became a staple of the 2012 real estate market recovery, but began to soften in November.

"November housing trends hinted at a winter slowdown ahead," said Alex Villacorta, director of research and analytics at Clear Capital.

"While short term growth across the country generally slowed, the housing market has built good momentum over the last year," he said. "As previously reported, these gains coupled with reduced rates of REO saturation signal housing should be strong enough to ride out winter, barring any shocks."

But Villacorta still is skeptical when it comes to the idea of the market maintaining its current upward trajectory in the wake of potential tax hikes.

Until there is certainty on that front, the U.S. real estate market for all intensive purposes remains in growth mode, albeit one with a slower pace in November. 

Home prices grew 4.6% nationally from year ago levels in November, Clear Capital reported. That is much improved from last year when national home prices fell 2.8% during the same period.  

The home price recovery continues to be led by the Western region of the United States with home prices in the West up 10.3% year-over-year, according to Clear Capital's latest Home Price Index.

While that's a solid jump, the region's price gains are down when compared to the 11.4% growth reported in October.

The South comes in second with 4%-price growth year-over-year in November, followed by the Midwest where prices went up 2.9%. Prices in the Northeast edged up only 1.4% when comparing November numbers to year ago figures.   

Despite high levels of REO saturation in the markets of Detroit, Las Vegas, Tucson and Atlanta, Clear Capital acknowledged these regions continue to see price growth even as distressed home inventories create drag.

Markets like Detroit, Las Vegas, Tucson, and Atlanta are great examples of markets seeing growth alongside declining, yet relatively high rates of REO saturation.

Detroit in November had an REO saturation level of 46.9%, but home prices still rose 3.1% month-to-month and 5.5% from last year.

Tucson's REO saturation level stands at 31% of the market, but home prices year-over-year are up 10.5%.

kpanchuk@housingwire.com

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