Bubbles bursting in leading markets could leave bad aftertaste for this recovery.
- Outside of the usual headline-making markets, there are seven markets, considered “major” in density and culture, which are in bubble territory. These markets have had two years of consecutive quarterly softening, meaning each subsequent quarter, over the two year period starting May 2013, has seen less growth than the previous quarter. We’ve ruled out seasonality since two summers and winters have gone by with no observed impact on the softening.
- Though May’s top performing markets continue to see improvements, no one market is on pace to match the rates of growth observed over the last 12 months. In other words, something big needs to happen for the nation’s steadiest markets to best their current yearly rates of growth, something that has yet to be seen in force as we enter the height of the real estate season. (Chart 2)
- After a long winter in some parts of the country, namely the Northeast and Midwest, the regions continue to struggle to shake off winter’s chill. While the Midwest rebounded from April’s negative threshold of -0.10%, back into positive territory at 0.10%, the region’s volatility stands to stymie consumer confidence through the spring and summer buying seasons.
- Data through May 2015 reports a 0.1% increase in the national quarterly growth rate from 0.5% to 0.6%. That’s the first increase observed since November 2014 and 7 consecutive months of declining, quarterly gains.
“At the surface, May data is serving up more of the same, which is an interesting indictment of the economic uncertainty facing the industry,” says Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital. “Small increases or declines in quarterly gains reflect both the normalization off of the ‘correction-to-the-correction’ and the uncertainty of the health of the housing market. These small changes track well with what we forecasted at the start of 2015—continued moderation and year-end gains of between 1% – 3%. But as we know all too well, there’s no such thing as standard fare in housing. Each micro market has its own flavor and prices.
“While it may come as no surprise that key markets with booming tech economies, like the San Francisco Bay area, are in bubble territory, there are seven others that meet our same definition of a bubble (Graph 1). After two years of moderating gains, originating from the optimism of once-in-a-lifetime deals, quarterly growth has decreased, stagnating to less than 1% in all markets except the Riverside, CA MSA and Miami, FL MSA after observing an average rate of 4.4% two years ago. Seven markets is certainly cause for concern and cumulatively bubbles bursting across the nation could put the June and spring rush for housing on the back burner.”
Graph 1. Seven markets in bubble territory and in jeopardy of bursting. Source: Clear Capital
| National and Regional Markets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Market | Qtr/Qtr% +/- | Yr/Yr | Distressed Saturation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| National | 0.6% | 5.3% | 17.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| West | 1.1% | 7.2% | 12.5% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Northeast | 0.2% | 2.7% | 16.2% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| South | 0.8% | 5.9% | 21.1% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Midwest | 0.1% | 4.8% | 22.1% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chart 1: National and Regional Markets – May 2015. Source Clear Capital
| Highest Performing Major Metro Markets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rank | Metropolitan Statistical Area | Qtr/Qtr% +/- | Yr/Yr | Distressed Saturation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | LAS VEGAS-PARADISE, NV | 1.8% | 6.4% | 20.1% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | SEATTLE-TACOMA-BELLEVUE, WA | 1.7% | 10.3% | 14.4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | HOUSTON-BAYTOWN-SUGAR LAND, TX | 1.6% | 11.5% | 5.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | DENVER-AURORA, CO | 1.5% | 10.9% | 8.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 | PITTSBURGH, PA | 1.5% | 14.2% | 12.0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6 | MIAMI-FORT LAUDERDALE-MIAMI BEACH, FL | 1.3% | 9.8% | 26.6% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7 | LOS ANGELES-LONG BEACH-SANTA ANA, CA | 1.3% | 8.1% | 10.4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8 | SAN FRANCISCO-OAKLAND-FREMONT, CA | 1.3% | 9.1% | 7.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9 | PHOENIX, AZ—MESA, AZ—SCOTTSDALE, AZ | 1.2% | 5.9% | 12.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10 | FRESNO, CA | 1.2% | 8.3% | 17.6% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11 | NASHVILLE-DAVIDSON–MURFREESBORO, TN | 1.2% | 8.7% | 11.0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 12 | RIVERSIDE-SAN BERNARDINO-ONTARIO, CA | 1.1% | 8.0% | 13.8% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 13 | SACRAMENTO, CA—ARDEN, CA—ROSEVILLE, CA | 1.1% | 7.1% | 14.6% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 14 | SAN DIEGO, CA—CARLSBAD, CA—SAN MARCOS, CA | 1.0% | 6.1% | 10.0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 15 | PORTLAND-VANCOUVER-BEAVERTON, OR-WA | 1.0% | 7.2% | 11.2% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chart 2: Highest Performing Major Metro Markets – May 2015. Source Clear Capital
| Lowest Performing Major Metro Markets | ||||||||||
| Rank | Metropolitan Statistical Area | Qtr/Qtr% +/- | Yr/Yr | Distressed Saturation | ||||||
| 1 | PROVIDENCE-NEW BEDFORD-FALL RIVER, RI-MA | -2.9% | -12.2% | 19.2% | ||||||
| 2 | HARTFORD-WEST HARTFORD-EAST HARTFORD, CT | -0.8% | -4.2% | 24.2% | ||||||
| 3 | BALTIMORE-TOWSON, MD | -0.6% | -2.3% | 30.0% | ||||||
| 4 | CLEVELAND, OH—ELYRIA, OH—MENTOR, OH | -0.5% | 1.6% | 23.3% | ||||||
| 5 | BIRMINGHAM-HOOVER, AL | -0.3% | 1.0% | 15.9% | ||||||
| 6 | DAYTON, OH | 0.1% | 5.7% | 23.3% | ||||||
| 7 | ROCHESTER, NY | 0.1% | 0.8% | 11.4% | ||||||
| 8 | BOSTON-CAMBRIDGE-QUINCY, MA-NH | 0.2% | 2.2% | 11.5% | ||||||
| 9 | NEW ORLEANS-METAIRIE-KENNER, LA | 0.2% | 2.9% | 21.3% | ||||||
| 10 | MILWAUKEE-WAUKESHA-WEST ALLIS, WI | 0.3% | 5.7% | 21.5% | ||||||
| 11 | TUCSON, AZ | 0.3% | 3.4% | 17.2% | ||||||
| 12 | COLUMBUS, OH | 0.4% | 6.1% | 17.9% | ||||||
| 13 | HONOLULU, HI | 0.4% | 1.6% | 7.7% | ||||||
| 14 | WASHINGTON-ARLINGTON-ALEXANDRIA, DC-VA-MD-WV | 0.4% | 2.6% | 15.9% | ||||||
| 15 | MEMPHIS, TN-MS-AR | 0.4% | 5.3% | 28.0% | ||||||
Chart 3: Lowest Performing Major Metro Markets – May 2015. 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.
The Clear Capital HDI Market Report
- Offers the real estate industry (investors, lenders, and servicers), government agencies, and the public insight into the most recent pricing conditions, not only at the national and metropolitan level, but within local markets as well.
- Is built on the most recent information available from recorder/assessor offices, and then further enhanced by adding the company’s proprietary streaming market data for the most comprehensive geographic coverage and local insights available.
- Reflects nationwide coverage of sales transactions and aggregates this comprehensive dataset at ten different geographic levels, including hundreds of metropolitan statistical areas (MSAs) and sub-ZIP code boundaries.
- Includes equally-weighted distressed bank owned sales (REOs) from around the country to give the most real world look of pricing dynamics across all sales types.
- Allows for the most current market data by providing more frequent updates with patent pending rolling quarter technology. This ensures decisions are based on the most up-to-date information available.
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.
