Home prices posted their largest annual gain in nearly two and a half years through December 2012, Clear Capital said, but could experience a slowdown in 2013.
In its latest home data index report, Clear Capital revealed that national price gains increased year-over-year in December by 4.9%, but are still off their peaks by 37.6%. One of the main reasons why appreciation was so high in December is due to the fact that values were at all-time lows at the start of 2012.
Furthermore, Clear Capital is only forecasting a 2.1% rise in home prices this year.
“Keeping in mind our current gains are off market lows at the start of the year, 2013 gains will be measured against a higher price floor after a full year of recovery,” said Alex Villacorta, director of research and analytics at Clear Capital. “The housing landscape, however, could quickly shift should the broader economy tumble back into recessionary territory. Whether by perception or actual decrease in buying power for the average consumer, residual effects of the fiscal cliff deal could cause housing to change course.”
At the regional level, the West had the best performance on a yearly basis, up 11.8% in December. Similar to the national expectations, there is an outlook for a moderate 2.8% uptick in prices in 2013 as buyers adjust to a higher priced market.
Unlike previous years when values at yearend fell, the South and Midwest had positive momentum in December 2012, both up 4% and 3%, respectively.
Meanwhile, the Northeast continued to struggle with yearly growth at 1.5%. The Truckee, Calif.-based analytic firm said yearly price gains in this region only broke out above 2% once over the year, with similar projections for 2013 to happen.
Major metropolitan markets experienced a wide range of price trends, with each city’s tendencies dependent on local economic conditions.
For example, the strongest recoveries have generally occurred in two types of markets: hard-hit markets like Phoenix, Miami and Las Vegas which offer investors attractive deals, while places like Seattle, San Jose and San Francisco have relatively strong local economies that lure buyers despite relatively high price points.
Out of the largest 50 major market cities, Seattle is expected to have the strongest recovery in values this year by 13.5%, Clear Capital projects. The analytic provider noted that Seattle has a relatively robust job market that will help drive overall housing gains.
Meanwhile, eight markets are likely to see prices fall this year, including Denver, Louisville, Charlotte, Philadelphia, Atlanta, Baltimore, Chicago and St. Louis. Of these cities, average declines should come in at just 0.9%.
"2013 should be interesting for the housing market, where national gains should continue to see upward growth but likely at a more modest rate,” Villacorta added. “On a local level, we expect to see shifts in the status quo for some hot markets, like Phoenix, as some buyer segments get priced out of the recovering markets. As those buyers search for opportunities, markets with improving local economies and low price points, like Minneapolis, could become the new targets.”