Clear Capital: South Region Flexes Its Housing Muscles

Sorohan, Mike msorohan@mba.org

July 12, 2016


Clear Capital, Reno, Nev., said home price growth in the South is expected to outpace the traditional regional leader, the West, for at least the next six months.

The company's monthly Home Data Index Market Report said nationally, quarter over quarter home price growth held steady at 0.6 percent, with three of the four regions seeing a bump thanks to a stronger spring home buying season. In the West, growth increased by 0.2 percent to 1.3 percent, while the South and Midwest saw increases to 0.8 percent and 0.3 percent, respectively.

"The annual spring housing boom has been beneficial to most regions across the nation, with most markets outside of the Northeast seeing a small bump in quarter-over-quarter growth in the last month," the report said.

At the metro level, southern cities dominate the top spots, with six of the top 10 markets. Home prices in Dallas and Nashville are predicted to see "stellar" growth throughout the remainder of 2016, increasing 3-4 percent. Major Florida markets are also predicted to continue to rise, with Jacksonville and Orlando growth forecasts nearly 2.5 percent by year-end, while homes in Tampa could see up to 4 percent growth over the next six months.

However, the report noted weakness in both the Northeast, where prices have been volatile, and the West, traditionally the champion of home price appreciation. Clear Capital said growth figures in the Northeast are "concerning," showing an average of zero price growth over the past quarter.

"This is especially alarming when considering that the spring season is a time when markets typically gain momentum leading into the busy summer season," said Clear Capital Vice President of research and analytics Alex Villacorta. He noted, however, while prices in the region as a whole have appeared to stagnate, several markets in the region that are performing positively, such as New York and Hartford, Conn., where prices have increased by 0.5 percent and 0.7 percent, respectively, over the past quarter.

Of greater concern, Clear Capital said, are regional year-end forecasts projecting the West and Northeast to fall potentially into negative territory over the next six months. The report suggested by the end of 2016, the South and Midwest could have the highest price growth over the next six months, at 0.5 percent.

Villacorta said price appreciation toward the end of 2016 could be much slower than its start, with all regions forecasted to see very little price change by the end of the year. "The Federal Reserve won't be raising interest rates this summer, and while this will help keep the cost of mortgage lending to a minimum, at least in the short term, there are other key global factors that could spell uncertainty for the American housing industry through the end of the year," he said.

Villacorta added that negative interest rates in several global markets could begin to push domestic interest rates down even further, which could have rather ambiguous effect--either increasing demand due to the low cost of borrowing or leading consumers to lose precious confidence in the housing industry. "It's still far too early to tell how the recent global economic and financial market shakeups will affect the U.S. housing market, but our initial forecasts are very cautious about overestimating potential growth, particularly in the Northeast and West," he said.

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