As home prices continue to soar year-over-year and commentators draw lines to historical averages, Clear Capital [1] offers one piece of advice to all those waiting to see a national peak anytime soon: Don’t hold your breath.
In its latest Home Data Index Market Report [2], the company says the market won’t reach peak prices again until 2021 at its current rate of growth.
“National home prices are right in line (within 2 percent) with inflation adjusted long-run average levels, indicating prices have normalized post-bubble and future rates of growth will look more like historical rates of growth,” Clear Capital said in its report.
By the company’s data, inflation adjusted home prices at the metro level show 46 out of 50 metro markets’ home prices are at pre-2003 levels, with half reporting prices below 2000 levels. In fact, Honolulu is the only market in the top 50 to see home prices within peak levels, partly due to its “unique supply and demand” situation.
With so many markets still so far down from peak prices, “it’s time for conversations surrounding price trends to shift away from the 2006 peak as the point of reference,” says Dr. Alex Villacorta, VP of research and analytics at Clear Capital.
“For new deals and investors without legacy assets, the new housing environment should be framed in terms of more typical, moderate rates of growth with tempered optimism for the ongoing housing recovery,” Villacorta said.
The good news in all this, Clear Capital says, is that even with prices trending up, “we don’t see evidence of a price bubble forming again”—at least not in most markets.
“Double digit gains over the last year, while similar to rates of growth in the run-up to the bubble, are off a much lower price floor,” Villacorta observed.