Housing Growth Expected to Slow For the Remainder of 2015

Outlook, Fitch RatingsConsumers grow uneasy as the spring season comes to a close and recent gains in the housing market begin to decline. Clear Capital, Inc., a provider of data and solutions for real estate asset valuation and collateral risk assessment, recently released its Home Data Index (HDI) Market Reportwith data through June 2015 that shows that 2015 will be a non-growth year.
In January, the company forecasted total national housing market growth for 2015 to reach 1.3 percent, more than five percent lower than growth for 2014 at 6.7 percent. The adjusted forecast presumes that year-end national growth will come in at 2.6 percent, falling within the projected range of 1 percent to 3 percent.
“With a first full look of the spring buying season and six-month update to the forecast, our data through June confirms our initial projection that 2015 would be a non-growth year," said Alex Villacorta, Ph.D., VP of research and analytics at Clear Capital. “Here we are six months later, and there is very little evidence to change our view that the year will end up with price growth coming in just around the rate of inflation."
The report found that while San Francisco’s and San Jose’s year-end growth rates are expected to remain positive, at 3.4 percent and 3.2 percent, growth for both regions are projected to decline into the negatives at -0.2 percent and -0.4 percent through the second half of 2015. Clear Capital added that this drop raises concern among consumers after the summer buying season and experiencing two years of consecutive, yet unsustainable, gains.
“In our June report, we went on record with concern of bubble markets across the U.S. Now San Jose is starting to go the way of San Francisco, at peak levels and now leveling off,” Villacorta said. “Both San Francisco and San Jose have been red hot markets, supported in large part by strong job growth. The latest numbers reveal, however, that both markets have reached their apex in the most recent upward price swing and are projected to take a slight dip into negative territory through the second half of 2015, by -0.2 percent and -0.4 percent. While both markets are projected to have total 2015 yearly growth rates of around 3 percent, entering winter 2015-2016 on the down side is of great concern. What started as 'red hot' at the start of 2014 may end as 'in the red' come 2016."
Regionally, growth across all regions remains flat, Clear Capital noted. The Midwest saw an increase in quarterly growth, from 0.1 percent to 0.3 percent. The West continues to be the strongest in terms of quarterly price grow at 1 percent and is expected to end 2015 with a 3.3 percent growth rate, reducing disparity between the East and West. Meanwhile, growth in the East is forecasted to come to a halt for the rest of 2015 at 0.1 percent, but it is also projected to end the year at 1 percent.
On a national level, the growth levels are about the same, the company says. Data through June looks similar to data through May 2015, with no change in quarterly growth at 0.6 percent and a slight drop in yearly growth from 5.3 percent to 5.2 percent. If spring and summer seasons actually reflect the peak of the housing demand cycle, 0.6 percent quarterly growth likely to come to pass as for how the rest of the year will turn out.
  

Justin Lee Thayer is Lane counties expert in market analysis for real estate investors. Call Justin @ 541-543-7287
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