Year-over-year increases in asking home prices for December slowed for the first time since the recovery began, signaling that the post-crash rebound might finally be fading, according to a new post from Trulia.
Asking prices rose in December 11.9% year-over-year, a deceleration compared with November’s 12.2% annual increase, notes the Trulia Trends post.
Asking prices also experienced a slowdown on a monthly basis, rising 0.4%—marking the third straight month of gains less than 1%—as well as on a quarterly basis compared to previous months, rising by a modest 2.6%.
While the year-over-year price gains in December are still primarily a reaction to the housing bust, the rebound effect is fading as the market enters 2014, writes Trulia Chief Economist Jed Kolko.
“Looking at the quarter-over-quarter price changes throughout 2013, the relationship between the severity of the housing bust and the recent price recovery was stronger earlier in the year than later in the year,” Kolko writes.
Additionally, citing Federal Housing Finance Agency data, he notes that the correlation between peak-to-trough price changes has been on the decline, from -0.59 in March; -0.45 in June; -0.43 in September; and -0.33 in December.
“This correlation is moving closer to zero, which signifies that the rebound effect is fading.”
Of the 100 largest metros tracked by Trulia, quarter-over-quarter prices rose in 83 metros and fell in 17—the most areas that posted quarter-over-quarter price declines in 10 months.
Metros that experienced the largest year-over-year price gains in December were those hardest hit during the housing bust.
In these 10 metros, asking prices fell by at least a third from peak to trough, and by almost half or more in the three metros with the biggest price rebounds year-over-year, with Las Vegas (33%), Sacramento (28.2%) and Riverside-San Bernardino (25.9%) posting the biggest annual asking price changes in December 2013 compared to December 2012.
Conversely, the 10 metros with the smallest year-over-year price increases in December all had a milder housing bust than the top-10 metros that posted the biggest gains, Trulia notes.
Cities where asking prices rose the least compared to their December 2012 levels included Albany, NY (-1.3%); Baton Rouge, LA (-0.6%); and Little Rock, AR (0%).
“Overall regression analysis shows that recent price gains are most strongly associated with the severity of the local housing bust,” writes Kolko. “Markets where prices fell most during the bust offered bargains for investors and other buyers who have helped bid priced back up over the past two years.”
Key factors that contributed to slower price growth included the severity of the housing bust in certain markets as well as local foreclosures, Kolko notes.
While job growth might have had little impact on December’s price data, Kolko believes it will carry more influence later on during the year.
“As the housing market continues to recover, factors other than the rebound effect—like job growth—will matter more for price gains,” writes Kolko. “That means slower but more sustainable price increases.”
Written by Jason Oliva
