Price appreciation over the last year and half has taken home values “back to or about normal,” Fleming says in an interview with NMN.
Housing was overvalued by 20%-plus at the end of the boom. “Then we collapsed and overshot by about 10%,” he says. “Our analysis basically shows we significantly overshot fundamental price levels on the way down.”
The market undervalued prices by 10% at the bottom. The housing market has recovered since then and today it is back to normal.
Fleming sees prices flat-lining on a month-to-month basis during the fall and winter months before turning up in March. The chief economist forecasts home prices will rise 6% from September 2013 to September 2014.
Fleming also noted that the turnover in homes has returned to a normal level.
However, mortgage lenders are financing about two-thirds of existing home sales because of all-cash transactions and distressed sales.
In addition, new home sales are improving but still remain way below normal levels.
This is making the adjustment from a refinance market to a purchase mortgage market more difficult,” Fleming says. “The purchase market is not as large as it used to be.”