Despite beginning the year with market lows, most home prices gained momentum toward the end up 2012, finishing the year at 4.9% year-over-year price gains. Some markets, though they are few, may also suffer a backslide in values.
According to the latest Clear Capital home data report, national home prices are expected to increase by only 2.1% this year. The 2013 yearly gains are expected to be smaller partly because homes are starting on a higher price base, but the entire explanation is more complex than that, Clear Capital notes.
Furthermore, Alex Villacorta, director of research and analytics, warns that this could change at a moment’s notice.
“The housing landscape, however, could quickly shift should the broader economy tumble back into recessionary territory,” Villacorta noted. “Whether by perception or actual decrease in buying power for the average consumer, residual effects of the fiscal cliff deal could cause housing to change course. But as it stands now, home prices have continued to show resiliency by posting their largest yearly gain in nearly two and a half years.”
Regionally, the West is continuing to dominate the housing recovery, with growth up to 11.8% annually, reflecting a market that was hardest hit. The forecast for this year predicts a modest 2.8% gain in the West as buyers adjust to appreciation.
The Northeast saw the lowest rate of annual growth at 1.5%. This year is projected to be very similar to 2012, with yearly gains expected to hit only 1.4%.
The data index reported that the markets with the strongest recoveries in 2012, such as Phoenix, Miami, San Francisco and Las Vegas, will likely level out in 2013 as price appreciation brings many markets into alignment.
Slower growth in markets with robust recoveries underway can be seen as a mature stage of recovery, rather than a weakness, according to the Home Data Index Market Report.
Seattle, a market with a strong recovery already in the works, is expected to see the highest gains of the top 50 major metro markets at 13.5%.
“On a local level, we expect to see shifts in the status quo for some hot markets, like Phoenix, as some buyer segments get priced out of recovering markets,” said Villacorta. “As those buyers search for opportunities, markets with improving local economies and low price points, like Minneapolis, could become the new targets.”
Only eight markets are projected to see prices fall in 2013, including Denver; Louisville, Ky.; Charlotte, N.C.; Philadelphia; Atlanta; Baltimore; Chicago and St. Louis. For those eight markets, average declines should come in at just 0.9%.
“At the end of the day, there are still plenty of great deals to be had across the country, investors looking for decent return, and pent up homebuyer demand on the verge of materializing,” Villacorta added.
The report projects that 2013 will continue to grow at a healthy pace, although the chances of a robust recovery are slim as there is less ground to make up.
“While a larger economic setback could easily change the course for the worse, current rates of growth signal the market is slowly calibrating itself to pre-bubble rates and prices,” the report concluded.
