Tuesday, November 18, 2014

America's Two-Sided Real Estate Market

Corelogic's most recent Home Price Index Report provides us with a clearer picture of the two housing markets in the United States.  Here is a summary of September's report.

On a nationwide year-over-year basis, including sales of distressed properties, home prices increased by 5.6 percent.  When distressed properties are excluded, nationwide home prices rose by 5.2 percent.  While that sounds pretty good, in fact, on a month-to-month basis, home prices from August 2014 to September 2014 dropped by 0.1 percent.  With all of the price gains since the housing market peaked in April 2006 and then collapsed, nationwide house prices are still 12.6 percent below their peak.  If distressed sales are excluded, prices are still 8.6 percent below their peak over seven years ago.  The authors note that, while prices have continued to rise on a year-over-year basis, the rate of home price appreciation has dropped substantially as shown on this graph:

If we look at the peak-to-current price change nationally, this is what it looks like on a state-by-state basis with blue states showing prices that are now equal to their April 2006 peak and red state showing varying degrees of price depreciation:

States that hit new residential real estate peak values in September include Texas, Colorado, North Dakota, South Dakota and Nebraska.  On the other hand, the states with the poorest peak-to-current price level performance include the following:

The five states with the highest year-over-year price increases including distressed sales in September 2014 include:

Maine - 10.4 percent
Massachusetts - 9.7 percent
California - 7.6 percent
Texas - 7.4 percent
Michigan - 7.2 percent

The five states with the lowest year-over-year price increases including distressed sales in September 2014 include:

Arkansas - 0.1 percent
New Mexico - 1.1 percent
Connecticut - 1.2 percent
Maryland - 1.4 percent
Wisconsin - 1.4 percent

What lies ahead for U.S. housing prices?  Corelogic projects that house prices, including distressed sales, will rise by 4.6 percent by September 2015.  Much of this projected increase is based on a strengthening United States economy; if the economy should happen to experience a repeat performance of this year's first quarter contraction, upward pressure on real estate prices could completely evaporate.


  1. I belive that in order to "fix" the USA, housing has to fall . Wages are not going up and I don't think thats going to change. What can happen is that housing falls massively and then it can again be affordable for the average person. I think 4x median income is what it should be. So the common house can't be worth more then 200k. This just my thoughts on the topic.

  2. It should be noted as Viable Opposition has pointed out in the past that home prices in America vary greatly from area to area. This is very important when determining the real value of this commodity.