Home prices are still increasing in many parts of the country, but according to at least one major real estate data analysis service, they're doing so in a healthier, more sustainable fashion.
According to the recently released Trulia Price Monitor for May, asking prices have begun to stabilize, with year-over-year appreciation no longer exceeding 20 percent in any of the country's 100 largest metro areas. It marked the first month since July 2012 that none of the annual increases crossed that threshold, and based on the analysis provided by Trulia Chief Economist Jed Kolko, that's a positive development.
Fewer distress sales, more market balance
Appreciation rates, particularly in coastal metros such as the Bay Area, Boston, Los Angeles, New York, San Diego and Seattle, reached their peaks during the months of September and October 2013. At that time, 12 out of 100 metro regions saw median prices increasing by more than 20 percent from a year earlier - a pace that was both unsustainable and dangerous for markets that were still climbing back from the subprime mortgage crisis and other effects of the recession. Investor activity had a lot to do with the trend, as many distressed homes were bought and resold - at a price hike - by institutional investors who saw opportunities in the post-recession market. Now, with fewer foreclosures and otherwise distressed homes available, another transition is taking place, this time back toward a more traditional supply-and-demand dynamic.
Meanwhile, only four markets saw year-over-year declines in asking prices, a figure that represents a post-recession low. In other words, the recovery is more widespread, without the threat of a bubble.
"Today, with no markets seeing price gains of more than 20 percent and only four markets seeing price declines, home price changes are looking more balanced, sustainable and widespread than at any point since the price recovery began," said Kolko. "That means that the national price slowdown has not pushed more markets into price declines. Rather, the price slowdown has meant a deceleration in the booming markets where prices had been rising unsustainably fast."
Essentially, the Trulia data revealed that home prices are still on the rise, just at a much more controlled pace and in a manner that is helping owners regain household wealth and better manage their mortgages. More than 300,000 properties saw their equity levels increase during the first quarter of 2014, bringing the number of people in the U.S. with positive equity to more than 43 million. If that trend continues, more could be convinced to sell, spurring more healthy market activity.