Price growth slowing in the US amid concerns about longer term sustainability
Year on year property price growth in the United States fell from 9% to 8.4% in July, raising concerns about the market’s ability to maintain long term growth.
The data from the latest Clear Capital index also shows that distressed sales fell to 18%, a stark reduction since its peak of 40.8% in March of 2011.
The key issues facing the market include whether home price gains continue to fall past the historical range of 3% to 5% as discounted deals dry up or whether they stabilize to sustain moderate long term growth, according to the report.
Clear Capital's forecast through 2015 shows national home prices will rise just 1.5%, indicating prices may not have the strength to stabilize within this historical range of growth.
While the West of the country continues to dominate regional gains with eight of the top 15 major metro markets, the MSAs within the region are not immune to the strong moderating patterns unfolding across the country, the data shows.
The report points out that each market has its own unique demand drivers, yet similarities exist. Some Western markets like Phoenix and Riverside are seeing a strong pull back from their investor fuelled recovery, while others, like San Jose and Seattle, are experiencing moderation alongside strong local economic foundations.
The West is projected to see price declines of 0.8% through 2015, while the historically volatile Midwest could be home to the recovery's next group of heroes, with leading forecasted growth of 3.4%.
Missing from July's Top 15 list is Phoenix which has suffered from the effects of waning investor demand. In July, Phoenix yearly price growth softened to 10.4%, while distressed saturation fell to 13.5%. This is a significant reversal from more than 60% distressed saturation in March 2011, and a cumulative recovery of 62.3% home price appreciation.
The report says that following these notable gains, Phoenix is nearly in line with 2004 price levels, off by just 5%, suggesting Phoenix is where it needs to be. But there are doubts about whether it can stay there through 2015. Forecasts show Phoenix should see 2.6% through 2015, a sobering, yet realistic, rate of stable growth for the market.
Even the current recovery leader, Riverside, is going down the price path of Phoenix. Over the past two years, prices in the MSA have appreciated by a total of 53.2%, while distressed saturation has fallen from 68% to just 15.5%. Riverside's quarterly and annual growth led the top 50 metro markets in July at 2.1% and 18.3%, respectively.
Despite these seemingly strong growth trends, yearly growth in Riverside has fallen 6.6% points from 25% at the start of 2014, and quarterly growth has been cut by more than half over the same timeframe. Forecasts through 2015 show expected losses for the metro of 1.1%, indicating Riverside could see continued moderation turn to losses in the near future.
‘The force of moderation in July trends raises questions around the market's ability to sustain gains through 2015. Relatively speaking, a…