US property market recovery well underway with 6.1% annual growth

Residential property prices in the United States were up 6.1% on an annual basis last month, according to the latest Home Data Index from real estate valuer Clear Capital. The statistics also show that quarterly price trends at the national and regional level were moderately improved over the typically slow winter season although 11 of 15 of the lowest performing major metro markets saw quarterly price trends in February give way to minor losses.

‘While February’s yearly growth of 6.1% is encouraging, let’s keep in mind this rate of growth is measured against the market’s bottom, which we reported in our March 2012 Market Report,’ said Alex Villacorta, director of research and analytics at Clear Capital.

‘Consumer confidence continues to be vital to a broader housing recovery, and national quarterly home prices expanding 1% in the midst of winter is confirmation the recovery has legs. While 1% is weaker in comparison to more recent rates of quarterly growth, the positive trend continues to support homebuyer confidence and is on par with the new normal,’ he explained.

Recent updates on the regulatory front could also build momentum in the housing revival, he added. ‘For example, the Qualified Mortgage (QM) rule gives lenders more definition on extending credit to home buyers, who continue to be encouraged by positive economic signs. The real question now is how many of those sidelined borrowers will qualify for a loan under the new rules. All told, February’s home data shows the housing recovery is on track,’ he pointed out.

National and regional home price trends remained stable and nearly flat in February, as prices continued to hold their ground over the slow winter months. National quarterly growth of 1% was supported by quarterly growth of 2.1%, 0.4%, 0.7%, and 0.8% in the West, Midwest, Northeast, and South, respectively.

Quote from PropertyCommunity.com : “Existing home sales in the United States edged up in January, while a seller’s market is developing and home prices continue to rise steadily above year ago levels, according to the latest report from the National Association of Realtors.”

While the West continued to lead the recovery, the Midwest, Northeast, and South’s quarterly home prices remained flat over January. These trends are modest in comparison to the aggressive rates of appreciation the market saw during the run up but they do make an impression on consumers, said Villacorta. ‘By not dropping during the slow winter season, small quarterly growth could encourage consumers to re-engage in the housing market,’ he said.

National yearly growth of 6.1% in February marked the strongest yearly gains since August 2010 when the Homebuyer Tax Credit was boosting demand. While current home prices have improved notably over last year, gains are expected to moderate over the short term, as current yearly gains are measured against the market lows in 2012. Each region, like the nation, experienced stronger yearly home price gains, compared to last month’s trends. The West, fuelled by progress in markets like Las Vegas, Phoenix and Sacramento, was the only region to post double digit gains at 13.6%.

While many of the strongest metro housing markets reside in the West, the Midwest, Northeast, and South each made noteworthy progress in February. Yearly home price gains of 4.0%, 2.6%, and 5.1%, respectively, are significant in their own right, according to the firm. ‘These incremental gains may continue to fuel consumer confidence as rising home prices throughout the winter season build more trust in a sustained housing recovery,’ said Villacorta.

February home price trends in the strongest metro markets remained positive, with short term quarterly gains across the board. A handful of leading recovering markets, like Atlanta, Las Vegas, Phoenix, and Miami, remained in growth mode, however, their relatively low price points overall subject their short term trends to potential volatility moving forward.

The highest performing markets’ yearly growth remained robust in February with some 12 out of the 15 markets achieving double digit year on year price gains, and all markets on the list returned yearly gains above 8%. Strength in longer term trends most distinguishes the highest performing markets from the lowest performing markets.

The lowest performing markets shifted into contraction territory in February, with 11 out of 15 seeing slight quarterly declines. While the number of markets experiencing price declines expanded in February, from five to 11, nine of the 11 fell less than 0.5%. These minor declines are far from alarming, but something to keep an eye on, according to the firm. While the lowest performing markets showed some signs of weakness, they remain stable year on year. Just six metros on this list posted year on year declines, with five of them experiencing less than 2% in price erosion.

‘Given these metros represent the price trend floor for markets across the country, their relative stability is encouraging. Overall, the US housing market continued to hold up well in February and with spring just around the corner, we head into the more active home buying season on solid ground,’ concluded Villacorta.