Clear Capital: August National Yearly Price Gains of 10.2% Align With Housing Bubble Peak

Clear Capital® , the premium provider of data and solutions for real estate asset valuation and collateral risk assessment, today released its Home Data Index™ (HDI) Market Reportwith data through August 2013. Using a broad array of public and proprietary data sources, the HDI Market Report publishes the most granular home data and analysis earlier than nearly any other index provider in the industry.

August 2013 highlights include:

  • National yearly home price growth picked up to 10.2% in August. Mid 2006, the height of the bubble was the last time double digit yearly price growth was reported. However, current yearly gains are different in many ways from the peak.

-- Considering prices remain 32.5% off their previous highs and only in line with 2002 prices, we're not concerned about a new housing bubble.

-- Additionally, the low tier price segment of the housing market saw quarterly gains of 2.0%, the lowest since April 2012, indicating the sector that kick started the recovery is already on a path of moderation. From its peak rate of growth in April 2013, rates of growth for the low tier segment, or home sale values in the bottom 25th percentile, have fallen from 4.1% to 2.0%.

  • Regional and metro trends echoed those at the national level, where quarterly and yearly rates of home price growth mostly expanded.

-- Top performing major metro markets saw average quarterly growth of 3.4%. Annualized, the 14.3% represents a 7.7 percentage point drop over the current average yearly gains of 22.0%. This current rate of growth marks yet another sign moderation will likely unfold in the near future as the strongest markets position for a cooling.

"With the continued strengthening of home price trends in August, the need for perspective on market activity is even more important" said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital. "National yearly gains surpassed 10.0% for the first reported time since the peak of the market in mid 2006. Certainly these trends are exciting, particularly against the backdrop of the seemingly endless housing market woes following 2006. It's been a long, hard road and it's difficult not to celebrate double digit price growth.

It's important, however, to note a few sub-surface trends that signal these gains will likely subside over the coming months. Average quarterly gains in the top performing 15 major metros signal moderation is already underway, when annualized and compared to current yearly growth.

Additionally, we see the spread between low price tier and top price tier rates of growth the tightest since the start of the recovery. Considering the low tier price segment of the housing market led the recovery, the cooling in this segment will likely transfer through to the broader housing market. And cyclically, we are heading out of the busy buying season and into the slower fall and winter months. That's not to say the recovery is slated to stall, rather growth patterns are likely to return to more historical rates of growth, between 4.0% to 5.0%, rather than align with bubble-like growth.

At the end of the day, this is still great news for housing. Today's housing market is not irrational or out of balance within the broader context of housing trends, but as we learned, sustaining this pace of growth is simply not healthy. Our call for moderation is the next phase of a more mature recovery."

For the complete file of the Top 30 MSA price trends for August 2013, please contact Heather Shick.

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CONTACT: Heather Shick
         Economic Research Analyst
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