Home price appreciation in hardest-hit states picks up
Adjusting from unusual lows
Upward momentum in home prices held steady in the second quarter, with prices rising 2.1% from the first quarter.
This is the eighth consecutive quarterly price increase in the purchase-only adjusted index, according to the Federal Housing Finance Agency’s Home Price Index.
"The housing market experienced one of its strongest quarters since the boom in the middle of the last decade," said FHFA principal economist Andrew Leventis.
The seasonally adjusted index rose in 47 states, with Nevada, California, Nevada, Oregon and the District of Columbia seeing the steepest price hikes.
The impressive rise in appreciation is due to a variety of factors, but the principle reason is that these states are adjusting from unusual lows.
"Those states had very large increases during the boom, followed by a very large crash, so they’re having larger adjustment processes," explained National Association of Home Builders chief economist David Crowe.
RealtyTrac vice president Daren Blomquist also noted that these were some of the hardest-hit states during the housing crisis, "so they have a deeper hole to climb out of than other markets."
Another reason for the surge in home price appreciation within these states is the rise in demand, given the fact that weary buyers are now jumping back into the marketplace.
Furthermore, these states have a more streamlined non-judicial foreclosure process that allows the markets to quickly clear distressed inventory, both housing experts noted.
"[This sets] the stage for stronger home price recovery when compared to a state like Florida, which also was hit hard by the housing slump, but is still dealing with a lingering foreclosure problem thanks to a less efficient judicial foreclosure process," Blomquist said.
Of the nine census divisions, the Pacific experienced the stronger increase, posting a 4.6% increase quarter-over-quarter and a 16.2% increase year-over-year, the FHFA pointed out.
Home prices were weakest in the East South Central division, where prices increased 0.9% from the previous quarter.
For the 100 most populated metropolitan areas in the nation, second-quarter price increases were greater in Orlando-Kissimmee-Sanford, Fla., where prices grew by 10%.
On the reverse side, prices were weakest in Akron, OH, falling 3.9% over that period.
Overall, Crowe said going forward the market may witness a few road bumps that could hinder home price appreciation, including talks around the Federal Reserve tapering its bond-buying program, as well as, rising interest rates.
However, the bigger issue is tighter underwriting standards, which have kept people from qualifying for mortgages.
"Rising rates are not going to have the traditional effect we’ve seen because we’ve already reduced the number of people who can qualify for a mortgage because of tight lending standards. If interest rates continue to rise then they will have a greater impact on appreciation," Crowe concluded.