DS News - Digital Archives

HOME PRICES FORECAST TO WEATHER WINTER, BUT WILL CONGRESS ICE GAINS? rebounded 32.6 percent. Over the same period, home prices went from seeing yearly declines of 22.7 percent to yearly growth of 4.0 percent. Similarly, between December 2011 and September 2012, consumer sentiment gained 12.0 percent, and home prices moved from yearly losses of 2.3 percent to gains of 3.6 percent by Clear Capital's assessment. Now, the valuation company says, economic and housing improvements are priming pent-up homebuyer demand for a breakout. Consumer sentiment finally rebounded from the debt ceiling debate lows of last year, up 31.8 percent, and homebuilders are echoing consumers with confidence at a five-year high. While the Federal Reserve's recent announcement of QE3 should further improve housing affordability with lower mortgage rates and boost expectations for the market, Clear Capital contends it might not be enough to overcome "fear of the cliff." Recovery continued to take hold in ground in September with increases recorded for every corner of the country, Clear Capital reported. Improvements were so strong, in fact, the real estate valuation firm says yearly growth is forecast to shake off winter's chill and continue through the first quarter of 2013. That is, if federal lawmakers can keep from Home prices continued to reclaim lost squashing consumer confidence and, before coming head-to-head with the end-of-year deadline, can agree on a resolution for the $600 billion in tax increases and spending cuts scheduled to take effect—a looming cloud of financial uncertainty that pundits dubbed the "fiscal cliff." National home prices closed out the third curtain falls on 2012 and avoids the cliff, Villacorta says they run the risk of damaging consumer confidence—particularly among potential homebuyers—if a resolution fails to materialize until just before the year-end deadline. "Confidence is key to turning the recovery's near-term sprint into a marathon," Villacorta said. "The sooner businesses and consumers are reassured, the more likely they are to build, purchase, or loan on a house." According to Clear Capital, the housing Even if Congress grinds out a fix as the September at the national and regional levels, according to the company's report. The West dominated with 9.4 percent in annual gains— the highest yearly gain the region has recorded since the second quarter in 2006. Clear Capital says harder hit markets, many of which reside in the West, are driving what it calls the "first in, first out recovery." Projected gains of 5.3 percent over the next six months in the West should drive a sustained recovery at the national level through the winter months, the company explained. The South and Midwest saw yearly gains quarter 3.6 percent higher than the previous year, according to Clear Capital's latest Home Data Index (HDI). If the fiscal cliff is averted, the company projects a 2.2 percent gain nationally through the first quarter of next year with home prices defying the typical seasonal trajectory that follows the thermometer's lowering mercury. Clear Capital's Dr. Alex Villacorta says recovery now lies in Congress' hands. The company draws parallels between recent bouts of economic uncertainty and declines in both consumer confidence and home prices in its latest report. Consumers reacted negatively to the debt in September of 3.2 percent and 1.5 percent, respectively. Clear Capital expects the South to see further price advances of 1.9 percent through March 2013 and the Midwest to post a 0.8 percent rise in home prices. The Northeast continues to see annual ceiling spectacle last summer with a 14.3 percent drop in sentiment—the largest since the end of the recession—and, concurrently, home prices experienced their worst annual declines since the bottom of the market in 2009, Clear Capital reports. The company also points to May 2011 when housing is making notable progress with enough momentum to carry improvements well into the New Year, but he warns the 535 delegates who sit atop Capitol Hill could undo it all. "[W]e've turned our focus to the impending fiscal cliff," said Villacorta, Clear Capital's director of research and analytics. "With forecasted gains of 2.2 percent over the next six months, the threat of the fiscal cliff could throw a wrench into the recovery." 42 the debt ceiling debate really began to intensify and, consequently, when home prices dropped 6.8 percent year-over-year. Annual home price declines persisted through 2011 until finally finding some relief in early 2012, coinciding with recorded improvements in consumer sentiment. Clear Capital's data indicates strength in consumer sentiment also corresponded with the only two notable housing improvements since 2009. The company says between March 2009 and June 2010, consumer sentiment gains soften with prices in September rising just 0.9 percent over the previous year. Home prices in the Northeast are expected to do more of the same and remain relatively flat, growing 0.9 percent during the next six months, according to Clear Capital's forecast. The good news, Clear Capital says, is far more markets are improving than are declining. The company's forecast shows recovery will survive the typically slow winter and start the spring buying season strong. But as we approach the end of 2012, will fear from the impending fiscal cliff sway consumer confidence and discourage potential homebuyers? "We say yes, it can," Clear Capital stated. "Congress must make tough decisions before the 11th hour."

• Cover