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More top markets out of negative equity

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Winter is cooling off the housing industry, but the number of homes reaching all-time high prices continues to grow – even as some markets are turning negative, according to a new report from Clear Capital.

National home prices have crept upward at a pace of 0.9 percent over the last quarter, a rate that’s holding steady since last month. Despite an expected winter slowdown in real estate activity, nationwide annual price growth has actually increased 0.3 percent since last month to 6.1 percent, the highest reported year-over-year price growth since February 2015.

While national quarterly growth rates have remained stable so far this winter, underlying regional quarterly growth patterns have begun to shift in some areas. Home prices in the Midwest have grown at 0.8 percent over the last rolling quarter, a slight decrease of 0.2 percent from 1.0 perent since last month. Conversely, price growth in the Northeast has actually increased by an identical margin, upticking 0.2 percentto a quarterly average of 0.7 percent. In the Southern and Western regions of the nation, however, quarterly growth appears to be holding steady at a 1.0 percent quarter-over-quarter price increase.

The San Jose, California metro area is once again reporting negative quarterly price growth this month since initially turning downward in December 2016. After a temporary uptick to a neutral rate of 0.0 percent quarterly price change in January, prices in the formerly booming housing market of San Jose have fallen 0.3 percent over the last quarter. This time, the San Jose MSA area isn’t the only market in the nation where quarterly growth is in the red – the Hartford, Conn. metro area is now also experiencing negative quarterly price growth, where home prices have too fallen by 0.3 percent since fall.

Apart from these two negative MSAs, most markets are growing at impressive rates for a mid-winter check-in. Portland, Oregon is currently the nation’s fastest growing market and has been steadily growing around the 2 percent QoQ mark since last fall. In total, 8 major metro markets are growing at 1.5 percent QoQ or higher, compared to only 3 metro areas above this mark this time last year.

Continued, long-term price growth has pushed several MSAs to all-time price highs, and the report’s Home Data Index now indicates that 16 out of the nation’s top 50 largest metropolitan housing markets have surpassed the peak prices of the housing bubble. Outside of these major markets, dozens of other micro markets are also breaking glass ceilings and selling at all-time high prices. In total, these record-breaking major metro and micro markets account for around a third of the total national housing stock. In those markets that haven’t quite yet reached pre-recession price levels, an additional 5 percent of the national housing stock is less than 5.8 percent – the national rate of price growth in 2016 – from surpassing 2006 price levels.

National price growth is predicted to moderate in 2017 with annual growth projections in the 2-3 percent range. However, if growth is anywhere close to the levels seen in 2016, nearly 40 percent of homeowners nationwide who purchased during the height of the housing bubble could be safely above water by the end of 2017. For homeowners who purchased either before or after the record prices of Spring 2006, the proportions are even larger.

“Following several rounds of healthy, peak-season summer growth, winter gains thus far this season have remained relatively healthy across much of the country,” states Alex Villacorta, Ph.D., Vice President of Research and Analytics at Clear Capital. “And as prices have continued to climb in the long term during the post-housing crash, the large portion of the housing market that has been frozen in negative equity has shrunk significantly – meaning that an increasingly large portion of previously underwater homeowners may now have the option of entering the market. While the expected spring housing boost is still months away, an influx of fresh new demand on the market could further boost growth potential later this year – as long as there are no other shocks to the market.”

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