In the first quarter of 2013, home prices rose by 10.2%, the first double-digit gain since the peak of the housing bubble seven years ago, according to data from CoreLogic.
As rising home prices and mortgage interest rates begin to affect affordability and demand and home inventory becomes more balance, analysis from CoreLogic (CLGX) forecasts that price appreciation will start to decelerate in 2014.
Slowly, as more and more homeowners consider selling their homes to lock in capital gains, the pressure that has been driving prices upward will subside.
"Record levels of affordability, a slowly improving job market, and very small inventories of new and existing homes for sale will continue to drive U.S. home price appreciation during the summer," said David Stiff, chief economist for CoreLogic Case-Shiller.
"Although a small number of metropolitan areas show year-over-year declines, it is likely that home prices in these cities will turn positive by the end of the year," added Stiff.
Long Island, N.Y., Waukegan-Kenosha, Ill-Wis. and Poughkeepsie, N.Y., were three of the metros that experienced a small year-over-year home price drop, down 1%, 2% and 4%, respectively.
Conversely, some of the cities that were right in the middle of the housing bubble have made quite the turnaround. For instance, Phoenix were up a sharp 23% year-over-year, while Sacramento was up 21%. Detroit and Miami jumped 18 and 14%, respectively.
It’s no surprise that these markets are also facing extremely tight inventories of homes for sale. In Bismarck, N.D., which was up 13% year-over-year, housing demand from an influx of oil and natural gas workers is running ahead of supply.
In markets that are particularly favorable to sellers, inventory is extremely tight. Detroit, Phoenix and Sacramento have approximately a three-month supply of active listings, while Miami hovers around five and a half months.
With inventory so tight in many markets, new housing construction is also ramping up, although more slowly than expected. CoreLogic notes that builder confidence, which bodes well for construction activity, has been soaring, so it is expected that the pace of new construction is expected to increase more rapidly.
"Although double-digit gains usually indicate unsustainable appreciation and, possibly, bubbles in some metro areas, there is less need for concern now since home prices remain 26% below their peak nationally and are even lower in many metro markets," said Stiff.