Residential Price Growth in US Sees Eleventh Month of Moderation

According to the newest statistics released by Clear Capital, a specialist provider of property data, the US residential property market has seen moderation in price growth for the eleventh month running. Through September, yearly gains across the US decreased from the October 2013 high of 11.7% to a mere 7.8%.

The trend of moderation was especially marked in the Western part of the country, which saw annual gains virtually halved. October 2013 saw them reach highs of almost 20% (19.5%), but in September 2014 they languished at a mere 10.9%. The West is currently leading the US recovery, but Clear Capital says that if moderation continues at the rate we are currently seeing this may not bode well, potentially indicating declines on the horizon. However, the firm did point out that metro market trends may continue to keep buyers firmly on the edges of their seats as other markets wane. For example, September saw opportunities in Detroit rise by 21.9% year-on-year, driven in part by a crop of discounted opportunities.

The 15 markets to deliver the most lackluster performances, according to Clear Capital’s data, each showed gains of less than 1% over the last three months. Short term falls continue to dog these markets, and if current trends continue these could eventually turn into losses on annual timescales.

The figures also reveal that discounted distressed opportunities are becoming thinner on the ground. 2011 saw this kind of deal reach a high of 38.4%, but September this year saw much more modest levels of 38.4%. This, the report says, could have significant short-term impacts though ultimately prove healthy. As the report puts it, “Historically, we’ve observed rising prices as distressed saturation declined. While reduction of distressed saturation is a healthy move for markets long term, over the short term it removes a key demand segment at a time when full buyer momentum has yet to be established.” The West, the report points out, is where this linkage between prices and distressed saturation has most prominently been observed.

Similar trends have been observed in consumer sentiment, according to the University of Michigan’s index. While consumer sentiment has been rising and reached a 14-month high last month, the pace of growth has been noticeably slowing. Both consumer confidence and price growth look like they could be headed for a dip. Clear Capital’s vice president of research and analytics, Alex Villacorta, “With less fuel stoking investors’ fire and the consumer yet to feel confident in the market, we expect at best either a return to pre-bubble norms or a departure into negative territory.”

If price gains fall into negative territory, which Villacorta believes could easily happen without better consumer confidence growth, he feels there is a “risk of invoking a negative feedback loop between falling prices and reduced confidence from potential homebuyers.”

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