US home prices on the road to recovery, up 2% in July 2012 quarter

The West leads the way in price increases

National real estate prices in the United States in July picked up on annual and quarterly terms with the West leading the way, according to the latest Home Data Index Market Report from Clear Capital.

One third of top metros posted double digit yearly gains, while the bottom 15 metros generally saw prices stabilize. Overall prices rose by 2% quarter on quarter, up from the 1.7% gains of the previous quarter.

Prices in the West increased 4.4% and in the Midwest they were up 2.1%. The South saw quarterly gains of 1.5% and the Northeast saw a rise of 0.4%.

‘July home price trends continued to show promise at a time when the strength of the broader economy is in question on many fronts,’ said Alex Villacorta, director of research and analytics at Clear Capital.

‘The national housing market defied the drag of a softening economy with increasing gains of 2% over the last rolling quarter. Housing gains in the West continued to lead the nation, and more importantly, for the second month in a row, the price rebound has broken out of the low price tier segments into higher priced homes. As the pool of buyers expands, the West continues to position for the next phase of recovery,’ he explained.

‘While significant risks remain at large, housing now has the potential to enter a positive feedback loop. Price increases could lead to increased confidence. This could motivate buyers, propelling the recovery in spite of the potential economic slowdown outside the housing market. Of course it’s still possible that housing could experience a pull back if contagion from other economic sectors bleeds through, but right now there appears to be a healthy level of resilience,’ he added.

Two out of four regions have now seen rolling quarterly growth over the last two months, and three out of four regions have experienced quarterly gains over the last five months, fuelling yearly gains.

Yearly growth for the broader national market expanded to 2.2% in July, 0.5% higher than June. Boosting growth at the national level, the West saw home prices roll up an impressive 6.2% over the previous year. The South and the Northeast also contributed to national price growth, with 1.8% and 1.6% yearly gains, respectively. While the Midwest has yet to post long term growth, the slight decline of 0.1% improved over last month’s yearly losses of 0.6%.

July marked the third consecutive month of national yearly gains, with longer term price trends at the national level last seen this strong in September 2010, when the First Time Homebuyer Tax Credit temporarily drove prices higher.

Villacorta said that without external stimulus driving demand, this latest round of gains is particularly encouraging.

‘Strengthening fundamentals have finally allowed prices to move beyond stability and into a seemingly sustainable growth mode, providing reason for consumers to feel more confidence in housing overall,’ he added.

He also said that confidence in housing will be key to future progress, giving buyers a reason to get off the sidelines, resulting in higher demand that could feed additional gains, and creating a positive feedback loop.

‘Certainly the alternative is still possible, where a hiccup in consumers’ outlook could stall progress, further diminishing the willingness of a homebuyer to make a purchase,’ he said.

While the recovery will continue to take place market by market, Villacorta believes that July home price trends were largely positive.

‘A solid foundation for future progress has been established in the lowest performing markets, while many markets are already in the early stages of recovery, and some, like the West are seeing a more advanced recovery unfolding,’ he concluded.

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