Fiserv Case-Shiller Home Price Insights: Housing Market Returning to Normal, Poised To Extend Gains
- Home prices projected to grow 3.7 percent between Q3 2013 and Q3 2014
- Home prices in nearly all metro areas on track to increase in 2013
- Trends point to a return to a normal housing market, with prices projected to grow 3.3 percent per year over the next five years
Fiserv Case-Shiller projects home prices to increase 0.6 percent over the 12-month period from the third quarter of 2012 to the comparable period of 2013. The recovery is expected to gain further momentum in subsequent years: home prices are projected to grow at an annualized rate of 3.3 percent from the third quarter of 2012 to the third quarter of 2017. Both home prices and home sales volumes increased steadily throughout the last year, making 2012 the first positive year for both of these metrics since the housing market crash, when the gains induced by the home buyer tax credits in 2009 and 2010 are excluded.
"2012 was the first year since 1997 that the housing market has
resembled something recognizable as normal. For the past 15 years, home
price changes and sales volumes have either been boosted by a bubble
mentality or crushed by crash psychology," said
The recovery in home prices has been solid and broad-based. At the end of the 2012 third quarter, prices were rising in approximately 62 percent of all U.S. metro areas, compared to 12.5 percent in the same period a year ago. Average U.S. home prices increased 3.6 percent from the third quarter of 2011 to the comparable period of 2012. Many of the metro areas that suffered the most severe declines during the housing market crash enjoyed the highest price increases in that period.
Fiserv Case-Shiller projects that by the end of 2013, home prices will be rising in nearly every metro area in the U.S. Some markets may experience short-term double-digit price jumps that could be partially reversed by price declines as large tranches of bank-owned inventory (REO) are liquidated. In other markets, price appreciation will slowly return to normal rates as home buyers regain confidence that the market has found its footing.
Stiff cautioned that the parallels to previous years should not be
overstated. Unlike in 1997, there are millions of homes with delinquent
mortgages, in the foreclosure process, or in REO inventories listed for
sale or waiting to be sold. But many trends are positive. With both
prices and mortgage payments at historic lows relative to income,
"The number of new housing units being built per household is near a record low. As momentum in the housing market builds, we will see the residential real estate sector once again make large contributions to the economic recovery. If residential investment — which encompasses all direct spending on residential real estate construction and activity — returns to its 1997 level over the next two years, then housing will boost overall economic growth by 0.5 percentage points in 2013 and 2014," Stiff continued.
"In all of the bubble-crash markets, foreclosures will have a persistent
but diminishing drag on price appreciation. Since the timing of the
disposition of foreclosed properties can be highly uncertain, we will
witness choppy price movements as individual metro markets stabilize.
For example, in late 2011, prices in
"Although some recent real estate activity has been speculative, it seems as if buyers have more realistic expectations about housing market returns after having lived through the largest housing market crash in U.S. history," Stiff added. "But even if bubble mentality is creeping back into some markets, houses are much cheaper now than they were in 1997, so it would take a much longer run of double-digit appreciation to lead to the price extremes that we saw at the peak of the bubble in 2006."
The Fiserv Case-Shiller Indexes, which include data covering thousands
of zip codes, counties, metro areas and state markets, are owned and
generated by
Representative home price data for major U.S. markets:
| Metro Area | Population | Change in | Change in | Forecast Change | ||||||||
|
(2011) |
Home Prices | Home Prices | in Home Prices | |||||||||
|
(2009:Q3 |
(2011:Q3 |
(2012:Q3 |
||||||||||
|
to 2012:Q3) |
to 2012:Q3) |
to 2013:Q3) |
||||||||||
|
|
311,591,917 | -1.3% | 3.6% | 0.6% | ||||||||
|
|
1,783,519 | 2.0% | 3.0% | 0.3% | ||||||||
|
|
2,729,110 | -5.1% | 1.9% | -0.2% | ||||||||
|
|
1,858,464 | -0.9% | 2.3% | -0.2% | ||||||||
|
|
2,180,758 | -1.1% | 1.1% | 0.9% | ||||||||
|
|
1,778,568 | -1.1% | 0.5% | -1.3% | ||||||||
|
|
1,360,251 | -11.7% | 0.3% | -4.1% | ||||||||
|
|
2,052,676 | -5.1% | -0.9% | -1.5% | ||||||||
|
|
1,294,849 | -1.3% | 0.1% | -0.5% | ||||||||
|
|
1,562,216 | -6.0% | -0.8% | -0.9% | ||||||||
|
|
1,617,142 | -0.2% | 2.3% | 0.4% | ||||||||
|
|
1,191,089 | -0.9% | 2.6% | 0.7% | ||||||||
|
|
2,171,360 | -3.6% | 7.9% | -8.3% | ||||||||
|
|
4,030,926 | -5.4% | -0.6% | 0.2% | ||||||||
|
|
1,163,515 | -5.0% | -1.0% | -1.4% | ||||||||
|
|
2,176,235 | -3.7% | 6.1% | -5.4% | ||||||||
|
|
1,145,905 | -5.2% | 2.5% | 4.6% | ||||||||
|
|
2,194,927 | -0.5% | 0.7% | 0.8% | ||||||||
|
|
1,865,450 | 14.6% | 12.5% | 0.7% | ||||||||
|
|
2,842,155 | -5.3% | 2.2% | -2.3% | ||||||||
|
|
989,569 | -12.4% | 8.2% | 2.2% |
Additional Resources:
- Fiserv Case-Shiller - www.caseshiller.fiserv.com
-
Federal
Housing Finance Agency (FHFA) - http://www.fhfa.gov/
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