The housing market is seeing prices appreciate at a normal pace, with further growth expected in the next five years, according to Fiserv Inc.
From Q3 2011 to Q3 2012, home prices rose by 3.6 percent, the Fiserv Case-Shiller Indexes revealed.
Furthermore, Fiserv predicts a 0.6 percent increase in home prices from Q3 2012 to Q3 2013. The gains are expected to continue into the next 5 years, with prices projected to grow at an annualized rate of 3.3 percent from Q3 2012 to the Q3 2017.
When excluding gains from the 2009 and 2010 home buyer tax credits, Fiserv noted 2012 was the first positive year for home prices and home sales volumes.
""For the past 15 years, home price changes and sales volumes have either been boosted by a bubble mentality or crushed by crash psychology,"" said David Stiff, chief economist at Fiserv.
""It took until the end of 2011 before housing markets finally started to stabilize. The latest Case-Shiller results show a return to a historically normal pace of price appreciation in the last year,"" he added.
Fiserv's index also showed improvement across U.S. metro areas. At the end of Q3 in 2012, home prices were rising in about 62 percent of the 380 metros covered by the Fiserv Case-Shiller Indexes. A year ago during the same time period, just 12.5 percent of metros were seeing an increase in prices.
The Fiserv Case-Shiller predicts nearly all metro areas will experience rising prices by the end of 2013.
However, growth patterns won't be consistent across all markets, with some seeing ""short-term double-digit price jumps that could be partially reversed by price declines as large tranches of bank-owned inventory (REO) are liquidated,"" while other markets will witness a slow return to normal rates, Fiserv explained.
""Since the timing of the disposition of foreclosed properties can be highly uncertain, we will witness choppy price movements as individual metro markets stabilize,"" said Stiff. ""For example, in late 2011, prices in Atlanta dropped sharply because of a substantial jump in REO sales, and it is possible that we will see similar, temporary price declines in other markets as subsiding waves of foreclosed properties buffet these markets. In other markets, investor demand is quickly absorbing listed REO properties, and as a result, foreclosures are no longer pulling home prices downward.""
Stiff also doesn't expect to see another bubble.
""[I]t seems as if buyers have more realistic expectations about housing market returns after having lived through the largest housing market crash in U.S. history,"" Stiff added. ""But even if bubble mentality is creeping back into some markets, houses are much cheaper now than they were in 1997, so it would take a much longer run of double-digit appreciation to lead to the price extremes that we saw at the peak of the bubble in 2006.""