Home prices improved in all 42 counties tracked in the PIR over the last month, quarter, and year. The appreciation occurring over the last 12 to 18 months is in excess of their long-term average and is happening at an unsustainable pace, the San Diego-based analytic firm cautioned.
For the last year, property values have increased from a minimum of 4% in Suffolk County, N.Y., to a maximum of 31% in Sacramento. The national average appreciation is 16%, DataQuick says.
Other notable cities that experienced a substantial rise in home prices include Las Vegas at 31%, Oakland, Calif., had a 27% jump, Portland rose by 22%, and Detroit and Phoenix were both up 21%.
Moderate economic fundamentals supported long-term home price growth rates of 3% to 4%, respectively, in the past, says Gordon Crawford, vice president of analytics for DataQuick.
The rapid increase in home prices since last year should have some immediate implications on various areas of the housing market, Crawford says.
Homes listed for sale on the open market will increase because homeowners will shift toward a position of positive equity from a negative equity position. Borrowers no longer underwater can sell their home without being required to bring cash to the table to close.
Future foreclosures from currently delinquent loans will decrease as homeowners will avoid defaulting on their mortgage because they now have equity in order to sell their property. Foreclosures decreased in 24 of the 42 reported counties analyzed by DataQuick’s PIR on a monthly and yearly basis during September.
Other consequences home price increases will have on the industry include continued single-family rental demand driven by decreases in home affordability, sustained risk of home price corrections and stringent mortgage credit standards, and an increase in purchases by investors driven by continued rental demand and tight credit standards.
Current home price growth rates cannot continue without increased risk of a substantial correction, Crawford warns.
“This rate of growth is spreading at an unsustainable pace as it is not supported by the underlying economic fundamentals,” Crawford says. “While generally positive, current economic drivers are weaker than those experienced in most previous expansions, leading to considerable uncertainty about future economic prospects.”