The highest home price gains for July 2014 are in the Midwest and South, and those gains are more likely a result of job growth as opposed to other market influences, according to the Trulia Price Monitor.
Average month-over-month gains for the top 100 U.S. markets increased by 0.8 percent for July after experiencing a 1.2 percent increase for June. The quarter-over-quarter increase for March through June of 2014 was 2.5 percent, still below the 3.0 or higher percent posted in Q2 of 2013. For July 2014, year-over-year price gains were reported for 97 out of the top 100 markets, while quarter-over-quarter gains were posted in 94 out of 100 markets.
Despite the widespread price gains, none of the top 100 markets reported year-over-year increases of more than 15 percent for the first time in 26 months.
Riverside-San Bernardino, California, had the highest year-over-year increase at 15 percent, but it was the only western market to place in the top 10 in that category. Outside of Riverside-San Bernardino, the other nine markets in the top 10 were in the South or Midwest. Birmingham was second with 14.2 percent and Miami placed third with 14.1.
Many markets such as Little Rock, Baltimore, and Rochester are seeing minimal price gains or even falling prices due to what Trulia chief economist Jed Kolko refers to as the "rebound effect," which resulted from buyers grabbing houses at relative bargains during the bust. Kolko explained that price gains tend to slow down as the bargains run out and there is nothing left from which to rebound.
The report found through a series of comparisons that home prices are increasing in the South and Midwest markets faster than others due to faster job growth. A significant correlation was discovered between job growth in nine of the top 10 markets with price increases (Detroit was the only exception).
The correlation, out of a scale of 1 to -1, between employment and home price changes was 0.53 for July 2014. Excluding Detroit, which had a year-over-year job loss of -1.0, the correlation was 0.59 between price changes and employment.
As for the rebound effect, the correlation between the price decline during the bust (known as peak to trough pricing) and price changes year-over-year was 0.51 for July 2014 (.50 without Detroit), slightly below that of the correlation between employment and year-over-year price gains.
This a reversal from the statistics posted in July 2013, when the correlation between job growth and price gains (0.61) was lower than that of the correlation between peak to trough pricing and price increases (0.68). Employment data comes from the Bureau of Labor Statistics' Quarterly Census of Employment and Wages (QCEW), while peak to trough pricing data comes from the Federal Housing Finance Agency.
This data indicates that the rebound effect is fading and that job growth is likely to be a bigger factor in the recovery of the housing market in the future.