The ‘Coldest’ U.S. Housing Markets Feeling the Winter Growth Chill

Spring officially begins next month, and for many U.S. housing markets stunted by the chilly winter season, warmer temperatures can’t come soon enough.

Through January 2016, the national U.S. housing market has grown, on average, 5% year-over-year and 0.7% on a quarterly basis, according to the latest Clear Capital Home Data Index (HDI) Market Report. The growth is in line with other recent market analyses and forecasts, which have put home prices in the ballpark of 5-7% gains over the past year.

Regionally, the West leads the way with 7.4% growth year-over-year in January and quarter-over-quarter growth of 1%. The South follows at a close second, with 5.3% annual growth and 0.6% on a quarterly basis. Meanwhile, the Midwest and Northeast experienced yearly gains of 4.4% and 2.2%, and quarterly increases of 0.5%, respectively.

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Slower quarterly growth rates also trickled down to the local market level, with many metro areas seeing a deceleration.

Take Dallas, for example. The city has been one of the top performing metropolitan statistical areas (MSAs) of the last six months, according to Clear Capital, but has since been one of the hardest hit markets this winter season, with growth falling from an autumn peak of 2% quarter-over-quarter growth in October 2015 to just 0.2% in January 2016.

“While the winter slowdown isn’t necessarily a surprise, a drop in growth of this caliber could indicate trouble in the market as home price appreciation is essentially null,” states Clear Capital in its February HDI Market Report released Monday.

Clear Capital notes other top MSAs are also feeling the chill this winter as well, including San Jose, Calif., which has dropped from its high of 2.5% quarterly growth in October to a low of 1% this January.

Others such as San Francisco and Atlanta have each experienced similar drops in growth since autumn and into the winter period, while other MSAs such as Providence, R.I., and Houston continue to see high gains despite the greater national market slowdown.

The Providence-New Bedford, Mass.-Fall River, Mass. metro area surged from just 0.5% quarter-over-quarter growth in December to 2.8% quarterly growth in the last month.

Meanwhile, Houston also made a seasonally uncharacteristic jump in quarter-over-quarter growth over the last month, rising by an impressive 0.5% from 1% to 1.5% quarterly growth, according to the Clear Capital HDI.

“These two markets appear to be unaffected by the typical Winter slowdown as price growth is on the rise,” Clear Capital stated.

At the opposite end of the spectrum, cities like Birmingham, Ala.; Memphis, Tenn.; and Rochester, N.Y. were among the lowest performing major metro markets, seeing quarter-over-quarter growth drop 0.6%, 0.4% and 0.1%, respectively in January. Additionally, each of these markets also had double-digit rates of distressed saturation.

“The typical winter real estate slowdown appears to be in full effect, as growth is down across most of the nation’s markets,” said Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital. “While we would typically expect a market downtrend this time of the year due to an overall lower level of activity in the real estate market, there is added volatility in the market due to the implementation of TRID, the broader economic slowdown, and the string of bad runs in the equity markets.”

These factors, Villacorta added, appear to be compounding the traditional “wintry effect” by adding to the overall uncertainty of the housing market, likely scaring off potential buyers and driving overall demand downward. And it remains to be seen just how long winter’s impact on housing will last.

“If the lack of confidence and affordability in the housing market continues to crowd out some key segments of the housing markets, namely first-time homebuyers, it could be a long winter for the nation’s real estate market,” Villacorta said. “But, as the nation’s consumers begin to adjust to the new norm of a higher cost to entry, some individual markets may be able to stave off the cold winter and see spring come early.”

Written by Jason Oliva

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