Home Price Surge Likely to Continue
Posted by Don Dutton at Oct. 14, 2012
Home Prices Forecast to Weather Winter, but Will Congress Ice Gains?
Home prices continued to reclaim lost ground in September with increases recorded for every corner of the country, Clear Capital reported Tuesday. Improvements have been so strong, in fact, the real estate valuation firm says yearly growth is forecast to shake off winter’s chill and continue through the first quarter of 2013.
That is, if federal lawmakers can keep from squashing consumer confidence, and before coming head-to-head with the end-of-year deadline, can agree on a resolution for the $500 billion in tax increases and spending cuts scheduled to take effect—a looming cloud of financial uncertainty that pundits have dubbed the “fiscal cliff.”
National home prices closed out the third quarter 3.6 percent higher than the previous year, according to Clear Capital’s latest Home Data Index (HDI). If the fiscal cliff is averted, the company projects a 2.2 percent gain nationally through the first quarter of next year with home prices defying the typical seasonal trajectory that follows the thermometer’s mercury lower.
Clear Capital’s Dr. Alex Villacorta says housing is making notable progress, with enough momentum to carry improvements well into the new year, but he warns it could all be undone by the 535 delegates representing the American people that sit atop Capitol Hill.
While the Federal Reserve’s recent announcement of QE3 should further improve housing affordability with lower mortgage rates and boost expectations for the market, Clear Capital contends it might not be enough to overcome “fear of the cliff.”
Recovery continued to take hold in September at the national and regional levels, according to the company’s report. The West continued to dominate with 9.4 percent in annual gains — the highest yearly gain the region has recorded since the second quarter in 2006.
Clear Capital says what it calls the “first in, first out recovery” has been driven by harder hit markets, many of which reside in the West. Projected gains of 5.3 percent over the next six months in the West are expected to drive a sustained recovery at the national level through the winter months, the company explained.
The South and Midwest saw yearly gains in September of 3.2 percent and 1.5 percent, respectively. Clear Capital expects the South to see further price advances of 1.9 percent through March 2013 and the Midwest to post a 0.8 percent rise in home prices.
The Northeast continues to see annual gains soften, with prices in September rising just 0.9 percent over the previous year. Home prices in the Northeast are expected to do more of the same and remain relatively flat, growing 0.9 percent over the next six months, according to Clear Capital’s forecast.
The good news, Clear Capital says, is that far more markets are improving than are declining. The company’s forecast shows the recovery will sustain the typically slow winter, and start the spring buying season strong.
But as we approach the end of 2012, will fear from the impending fiscal cliff sway consumer confidence and discourage potential homebuyers?
“We say yes, it can,” Clear Capital stated. “Congress must make tough decisions before the 11th hour.”