With housing prices on the rise across the nation, and double-digit increases in some markets, CoreLogic quashes any fears of another housing bubble forming any time soon. In fact, according to the CoreLogic Case-Shiller Home Price Indexes released Thursday, the rapid gains are not expected to last.
After a 7.3 percent price gain in 2012, the nation’s housing prices will continue to rise over the next five years but at a slower pace, according to Case-Shiller. The indexes forecast a 3.9 percent annual increase through 2017.
Many of the markets that underwent the greatest price depreciation during the housing crisis are now experiencing the greatest price appreciation. For example, home prices in Phoenix rose almost 24 percent year over year as of the fourth quarter of 2012.
Prices in Miami rose 14 percent, and prices in Las Vegas rose 13 percent over the same time period.
However, homes in these markets remain undervalued, and the price increases are being driven by investor demand.
As homeowners looking to sell are encouraged by rising prices and as new construction picks up, increased inventory will dampen these rapid increases, according to CoreLogic.
Also, rising prices will eventually ward off investors, and “it is not clear if demand from first-time and trade-up buyers will immediately fill the void,” said David Stiff, chief economist for CoreLogic Case-Shiller.
As investors slow down, these markets may encounter waning price appreciation or even price depreciation, according to Stiff.
Regardless, “[e]ven if double-digit price appreciation were to continue in the former bubble metro areas, there is no reason to believe that new home price bubbles are forming,” Stiff said.
“That’s because single-family homes in these markets are still very affordable,” he added.
Seven of every 10 metro areas tracked in the CoreLogic Case-Shiller indexes of more than 380 markets experienced rising prices in 2012. In 2011, the ratio was one in five.
Many metros still experiencing price depreciation charted smaller declines over the year in 2012. For example, Long Island, New York, posted a 4 percent decline, while Virginia Beach, Virginia, posted a 2 percent decrease.
“We expect strong buying activity this spring will lead to stabilization of home prices in most lagging markets, resulting in rising home prices in nearly every metro area by the end of 2013,” Stiff said.
Since its launch, DS News magazine has positioned itself at the forefront of an
evolving industry. Always current with the most up-to-date
default servicing news, DSNews.com keeps you informed through daily Web casts,
community forums, and a wide range of industry resources.