Report calls for neutral outlook for housing market
Rising demand and historically low inventories is pushing up home prices across the US but affordability may soon weigh on demand according to Nationwide.
The firm’s quarterly Health of Housing Markets Report forecasts a neutral outlook for the second consecutive quarter, keeping the Leading Index of Healthy Housing Markets (LIHHM) out of positive territory after an almost 8 year run.
The LIHHM is a forward-looking measure of housing market sustainability and the dip into neutral territory is largely due to deteriorating housing affordability that could soon weigh on demand from homebuyers.
"Most regional markets in the US are still seeing strong demand and a limited number of homes for sale," said David Berson, Nationwide senior vice president and chief economist. "While the market is stable overall, conditions appear increasingly ripe for prospective homebuyers to put their plans on hold as affordability drops."
However, the report notes that for now market and economic fundamentals are supporting strong demand.
Regional variations
Across the 400 housing markets there are wide variations in house price growth with the hottest markets led by a 13.6 percentage point gain for San Jose in the past year.
Other heating markets include San Francisco: 7.1 pp, Las Vegas: 6.4, Columbus, Ohio: 3.1, Oakland, Calif.: 3.1, and St. Louis: 3.0.
Conversely, price gains slowed in some markets, snapping multi-year gains. These markets include: Portland, Ore.: -3.5 pp, Boulder, Colo.: -3.0, College Station, Texas: -2.7, Syracuse, N.Y.: -2.5, Fort Myers, Fla.: -2.3, and Dallas-Plano-Irving, Texas: -2.2.
"On one hand, half of all local markets remain in positive territory, suggesting sustainable housing markets over the next year or two," said Berson, referring to LIHHM scores. "On the other hand, unsustainably strong price gains are pushing more markets down to neutral and even negative scores."
