An early look at housing data in February shows a severe slowdown in home price growth as distressed sales activity grows stronger.
Clear Capital released earlier this week its latest Home Data Index (HDI) Market Report, recording only a 1 percent gain in home prices over the quarter ending last month. That figure is down from a 2.5 percent pace of growth for the January quarter.
While many price indicators have pointed to slowdowns over the last few months, the latest trend could be the start of something worse, says Dr. Alex Villacorta, VP of research and analytics at Clear Capital.
“Our early data shows national quarterly price gains are falling at a rapid pace and suggest overall prices could dip into negative territory soon if current conditions continue,” he said.
Three out of the 15 lowest performing metro markets in the latest HDI reported slight price declines over the quarter, while the remaining 12 were mostly flat. With winter not quite over yet, near-term price declines “are not out of the question,” according to Clear Capital.
Adding to the problem is a 1.8 percentage point uptick in national REO saturation, which stood at 22.7 percent as of the end of February—further threatening price trends.
“Since the market fallout in 2006, home prices have dramatically declined during sustained periods of rising distressed sale activity,” Villacorta explained. “Over the last two years, however, rising distressed sales have been offset by investor demand, which is not guaranteed to be present in 2014.”
He added: “Though it is not unusual to see rising distressed activity over the winter months, the current housing picture gives reason to be concerned. If we don’t see a correction come spring, the housing market may be in for a long year.”