As housing markets in San Jose dip into the red for the first time since 2011, an all-but-certain interest rate hike by the end of 2016 may push other over heated Californian markets over the cliff into the reality of falling home prices.
- With no major shakeups on our list of Highest Performing Major Metro Markets, the big newsmaker this month is out West as the tech metro of San Jose, Ca – one of the nation’s previously top performing housing markets since the market crash – is reporting negative quarterly price growth for the first time in five years. Home prices are reported to have fallen 0.3% over the last quarter, the lowest current quarterly growth rate in the nation and a far cry from this market’s peak growth rate of just under 6.0% QoQ during its recovery in late 2013.
- Additionally, there are other Californian markets teetering on the edge and exhibiting a similarly bubble-like behavior to San Jose, indicating that more markets in the state could turn negative in the very near future. San Francisco, Los Angeles, and Bakersfield are currently reporting 1.0% QoQ growth or less, each underperforming quarterly growth from this time last year by at least 0.7%. If the market climate of San Jose is any indication of what is in store for other high-priced Californian markets, more cities may dip into the red during 2017.
- Nationally, quarterly home price growth is holding steady at 0.9%, while national annual price growth has risen slightly to 5.6% – an uptick of 0.1% since last month. Additionally, as market conditions across the county continue to improve, the national average distressed saturation rate decreased by 0.4% to 12.8%, a level which has fallen just over 2.5% in the last year.
- Regional quarter-over-quarter price growth remains largely unchanged since our last report, as the West, Midwest, and South all continue to hover closely around the 1.0% QoQ growth mark. Quarterly growth in the Northeast, however, has increased 0.2% to 0.5%, the highest reported quarterly growth rate for the relatively lethargic region since February of this year.
“San Jose going negative over the last quarter is a huge deal, although no surprise given that growth in this market, and the Bay Area region as a whole, has greatly slowed over the last couple of years,” states Alex Villacorta, Ph.D., Vice President of Research and Analytics at Clear Capital. “Rapid price growth combined with lagging, sticky income levels quickly pushed home prices out of the affordable range for a majority of homebuyers, which is a key factor in this market’s recent downturn in performance. For this metro, turn times have slowed for both performing and distressed properties as demand has begun to slack, finally pulling the area into the red during this real estate slow season. While the San Jose market is the only major metro area in the nation reporting negative price growth, an increasingly likely interest rate hike by the Feds this month could just be the shock to the system that pulls other over heated markets even outside California and the West into the negatives, too. We’re keeping an eye on the situation in San Jose and markets nationwide as we begin to put together our 2017 housing market performance forecast.”
Graph 1. Price performance in San Jose and other California markets since 2011. Data through November 2016. Source: Clear Capital®
|National and Regional Markets|
Chart 1. National and Regional distressed saturation and changes in home prices from last quarter and last year. Data through November 2016. Source: Clear Capital®
|Highest Performing Major Metro Markets|
|Rank||Metropolitan Statistical Area||Qtr/Qtr% +/-||Yr/Yr||Distressed
|1||Portland, OR — Vancouver, WA — Beaverton, OR||1.9%||11.0%||6.1%|
|2||San Antonio, TX||1.8%||8.5%||1.5%|
|3||Tampa, FL — St. Petersburg, FL — Clearwater, FL||1.8%||14.3%||17.8%|
|4||Detroit, MI — Warren, MI — Livonia, MI||1.8%||7.8%||13.7%|
|6||Sacramento, CA — Arden, CA — Roseville, CA||1.5%||9.9%||7.9%|
|7||Seattle, WA — Tacoma, WA — Bellevue, WA||1.5%||11.8%||6.6%|
|8||Miami, FL — Ft. Lauderdale, FL — Miami Beach, FL||1.5%||10.4%||16.0%|
|9||Denver, CO — Aurora, CO||1.4%||10.7%||5.2%|
|10||Riverside, CA — San Bernardino, CA — Ontario, CA||1.4%||8.5%||10.6%|
|11||Nashville, TN — Davidson, TN — Murfreesboro, TN||1.3%||9.7%||6.7%|
|12||Dallas, TX — Fort Worth, TX — Arlington, TX||1.3%||9.4%||2.2%|
|13||Milwaukee, WI — Waukesha, WI — West Allis, WI||1.3%||5.5%||15.2%|
|14||Las Vegas, NV — Paradise, NV||1.3%||9.9%||14.8%|
Chart 2. Highest Performing Major Metro Markets through November 2016. Source: Clear Capital®
|Lowest Performing Major Metro Markets|
|Rank||Metropolitan Statistical Area||Qtr/Qtr% +/-||Yr/Yr||Distressed Saturation|
|1||San Jose, CA — Sunnyvale, CA — Santa Clara, CA||-0.3%||4.0%||3.3%|
|2||Hartford, CT — West Hartford, CT — East Hartford, CT||-0.3%||2.0%||17.3%|
|4||Virginia Beach, VA — Norfolk, VA — Newport News, VA||0.1%||1.4%||16.4%|
|5||St. Louis, MO||0.3%||4.1%||16.5%|
|6||Birmingham, AL — Hoover, AL||0.4%||1.9%||13.5%|
|7||New Orleans, LA — Metairie, LA — Kenner, LA||0.4%||4.9%||12.0%|
|8||San Francisco, CA — Oakland, CA — Fremont, CA||0.5%||5.4%||5.3%|
|9||Houston, TX — Baytown, TX — Sugar Land, TX||0.6%||5.6%||2.3%|
|11||NY, NY — No. New Jersey, NJ — Long Island, NY||0.7%||3.7%||11.3%|
|13||Atlanta, GA — Sandy Springs, GA — Marietta, GA||0.7%||6.8%||12.7%|
|15||Raleigh, NC — Cary, NC||0.8%||5.4%||4.6%|
Chart 3. Lowest Performing Major Metro Markets through November 2016. Source: Clear Capital®
About the Clear Capital® Home Data Index (HDI) Market Report
The Clear Capital HDI Market Report provides insights into market trends and other leading indices for the real estate market at the national and local levels. A critical difference in the value of the HDI Market Report is the capability of Clear Capital to provide more timely and granular reporting than nearly any other home price index provider.
Clear Capital® HDI Methodology
- Generates the timeliest indices in patent pending rolling quarter intervals that compare the most recent four months to the previous three months. The rolling quarters have no fixed start date and can be used to generate indices as data flows in, significantly reducing the multi-month lag time experienced with other indices.
- Includes both fair market and institutional (real estate owned) transactions, giving equal weight to all market transactions and identifying price tiers at a market specific level. By giving equal weight to all transactions, the HDI is truly representative of each unique market.
- Results from an address-level cascade create an index with the most granular, statistically significant market area available.
- Provides weighted repeat sales and price-per-square-foot index models that use multiple sale types, including single-family homes, multi-family homes, and condominiums.