Housing Bubble Unlikely, Home Price Appreciation Should Slow – CoreLogic

CoreLogic said today that home prices are projectedrnto increase 3.9 percent on an annualized basis between the fourth quarter ofrn2012 and the same quarter in 2017. rnHowever, a new housing bubble is not likely as market dynamics shift forrnboth supply and demand.  Prices rose 7.3rnpercent in 2012.</p

The CoreLogic Case-Shiller Index report notes thatrnthe increase in 2012 was the strongest rate of appreciation in nearly sevenrnyears and projected that prices will continue to improve in 2013 and beyond inrnthe more than 380 U.S. markets it tracks. rnThe company’s current analysis says that, “Cities at epicenter of housingrnbubble/crash are clocking highest rate of appreciation, largely driven byrninvestor demand.”</p

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“Home prices were up in seven out ofrnevery 10 metro areas in 2012.  Byrncomparison, in 2011 prices appreciated in fewer than one-in-five markets,” saidrnDr. David Stiff, chief economist for CoreLogic Case-Shiller. “We expect strongrnbuying activity this spring will lead to stabilization of home prices in mostrnlagging markets, resulting in rising home prices in nearly every metro area byrnthe end of 2013.”</p

Somernof the cities that were hit the hardest by the housing crash and resultingrnforeclosure epidemic are also recovering the fastest.  Phoenix saw a year over year price gain of 24rnpercent, Miami 14 percent, and Las Vegas 13 percent. Dr. Stiff observed thatrndemand in Phoenix is being driven primarily by investors. As prices rise, thernprofitability of investment properties will erode, dragging down investorrndemand.</p

Somernareas which have lagged in their recovery saw price declines slow.  These included Long Island, (-4 percent),rnVirginia Beach, Virginia (-2 percent), and Philadelphia (-1 percent).</p

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CoreLogic said that while the datarnpoint to continuing price appreciation, the overall national rate of home pricernincreases is projected to decelerate in 2013 from 2012 levels. The CoreLogicrnCase-Shiller Indexes project a 2.5 percent home price increase in 2013, as thernmarket dynamic shifts again in bubble/crash metro areas. While homes in thesernmarkets are still significantly undervalued, the strong investor demand forrnforeclosed properties, record levels of housing affordability and other demandrnfactors that have driven recent double-digit price gains are unlikely tornpersist throughout the year. </p

Price appreciation is also expectedrnto contribute to an increased supply of available homes as owners who have beenrnlocked into their current homes due to negative equity or were just unwillingrnto sell at existing prices begin to list their homes for sale.  This will tend to curtail the portion of pricernincreases that have been fed by unmet demand.</p

Dr. Stiff tamped down concerns ofrnanother housing bubble. “Even if double-digit price appreciation were torncontinue in the former bubble metro areas, there is no reason to believe thatrnnew home price bubbles are forming. That’s because single-family homes in thesernmarkets are still very affordable, even after last year’s large price gains.rnConsider Phoenix, where home prices rose 27 percent since the market hit bottomrnin 2011, making it the strongest residential real estate market in the U.S.rnYet, home prices there are still 45 percent below their 2006 peak,” Stiffrncontinued.</p

Stiff said some of the reboundingrnareas like Phoenix will likely see price volatility as all cash sales andrninvestor demand retreat.  “It is notrnclear if demand from first-time and trade-up buyers will immediately fill thernvoid,” he said, “as mortgage lending standards are still very strict and manyrnconsumers remain risk-averse. If non-investor demand ramps up too slowly, thenrnrecent double-digit price appreciation could decelerate suddenly or even turnrnnegative for a few months.”</p

The CoreLogic Case-Shiller Indexes,rnwhich include data covering thousands of ZIP codes, counties, metro areas andrnstate markets, are owned and generated by CoreLogic with supplemental data fromrnthe Federal Housing Finance Administration. rn

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