National trends were echoed at the regional level, with the West seeing the strongest moderation across the country and overall growth has slowed now for 11 months in a row.
In fact, for the first time since the start of the recovery three years ago, the West’s yearly rates of growth fell below 10%, a sure sign of more moderation to come over the next several months for the nation, according to the firm.
At the height of the recovery in 2013, national prices including distressed sales outperformed the performing only sale segment of the market by 4.2%. Now the all sale segment is outperforming the performing only sale segment by 3%.
These segments’ rates of growth will likely continue to fall in line with each other as investor engagement dwindles, a result of fewer distressed sale opportunities. As this occurs, markets will be more reliant on performing only sale demand and price growth,’ the index report explains.
It also points out that improvements in the broader economic landscape have not instilled confidence in traditional home buyers and the general lack of demand in the performing only segment, coupled with a dwindling supply of distressed inventory, leaves the future of home prices squarely in the hands of traditional home buyers, who have yet to show any signs of re-engaging.
It says that performing only sales are not yet strong enough to support recovery sized market growth without distressed sales.
The data also shows that it has been a steady descent for national yearly rates of growth. They have dropped 5% from a high of 11.7% in December 2013. This is due in part to the market’s natural normalisation as the correction to the correction subsides and distressed sale inventory dries up. While this is healthy for markets overall, the weakness of price growth in the performing only segment is further cause for concern.
Excluding distressed sales, performing only national home price growth over the last year was just 4.4%, down from a recovery high of 7.2%. Even more concerning is the performing only segment’s drop in quarterly growth to 0.6%, nearly cut in half over the last rolling quarter which saw quarterly rates of growth at 1.1%.
‘Reduced reliance on distressed sales and diminishing gains in the performing only sale segment could be too much for the recovery to overcome as we enter winter. The recovery is at a tipping point. Markets need non investor demand to ramp up, and home buyer confidence restored,’ said Alex Villacorta, vice president of research and analytics at Clear Capital.
‘Should this turn into a negative feedback loop, the likelihood for quarterly price declines at the national level could turn into yearly price declines by the end of 2015. Performing only sale trends are a bellwether for what’s to come next year,’ he explained.
‘Think of home price growth since the housing collapse as a bouncing ball, where each successive bounce causes some energy to be lost and eventually movement stalls. We see notable weakness in the performing only sale segment, a sign that non investor buyers are not engaged enough to support the recovery,’ he pointed out.
‘As markets continue to normalise, we’ll see reduced growth from the distressed segment, which is a good thing for the market overall as the legacy of the housing crisis fades in the rear view,’ he added.
‘Yet, should national rates of growth turn to losses as a result, non-investor home buyers will likely further disengage. Quarterly losses could snowball into yearly losses, and create a negative feedback loop. At this point, the market showing signs of weakness is a cause for concern,’ he concluded.
