Report: Bubble Fears Unfounded
Market trends across the United States indicate a recovering real estate market—but not a bubble—according to the latest Home Value Forecast fromPro Teck Valuation Services. According to the forecast, the housing economy is in healthy rebound, so much so that even the markets showing the greatest appreciation are not near 2006 figures, when the market was at its historical peak.
Pro Teck's conclusion is decidedly more optimistic than other forecasts released in recent weeks. Earlier in July, FICO reported that 56 percent of U.S. lenders fear another bubble is forming. "While every market is different, and every neighborhood is different," said Pro Teck CEO Tom O'Grady, "we see positive trends now being the norm instead of the exception."
Pro Teck's conclusion validates reports by other industry organizations, such as Trulia, which predicted in March that the housing economy would stagger back to stable footing without creating a bubble.
One of the positive trends Pro Teck sees is the recovery of market values in states such as Florida, where processing foreclosure properties through a long judicial process had delayed recovery time. Now that foreclosures from a few years ago are concluding, the markets in judicial states are opening back up and more homes are being listed for sale. This, said O'Grady, is an important ingredient when it comes to market performance and growth. Active listings in any market, he said, have dramatically affect that market's dynamics—fewer listings indicate more competition that results in home price appreciation.
Still, Florida is home to three of the worst-performing markets in the country: Lakeland, Tallahassee, and Tampa. "Although many of the indicators in the bottom ten are trending positive, we are still seeing more than six months of inventory in all but one market and high foreclosure ratios," O'Grady said. "Until those indicators improve, those areas are likely to see weaker housing conditions for the coming months."
Florida's unenviable company at the bottom includes metros in Alabama, Indiana, North Carolina, West Virginia/Maryland and Ohio/Pennsylvania.
According to Pro Teck, listings in three of the top 20 markets (Hawaii, Texas, and California) have dropped by more than 60 percent year-over-year, leading to the most rapid growth in the U.S. But while the forecast is positive for the next three to five years in these areas, these markets will not sustain the recent their recovery pace, and a bubble will not form.
"The big difference this time around is that mortgage credit is much tighter due to increased regulation and the zero down, pick-a-pay, stated income, type of exotic mortgages that created the last bubble are no longer an option," O'Grady said.
According to the report, seven of the top 10 performing markets are in California, where they have been since last year and show no signs of taking a back seat to anywhere else anytime soon. "California is leading MRI, active listings, active price change percent, and sales-to-list price ratios," O'Grady said. "These hot markets are leading to very attractive prices for sellers." The other three markets in the top 10 were in Texas (Houston and Lubbock) and Seattle.
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