Rising prices amid reduced household formation is not a sustainable position for the housing market according to a leading indicator.
Nationwide’s forward-looking measure of housing market sustainability has tipped into negative territory for the first time since the end of the housing bust and affordability is weighing on market growth.
"Housing affordability concerns have been building within the housing market for several years," said David Berson, Nationwide senior vice president and chief economist. "For the first time since the recovery started, our affordability measures deteriorated enough to drop the national market outlook out of positive and into neutral territory."
The weakened outlook has also been impacted by natural disasters which have led to a rise in mortgage delinquencies in Florida and Texas.
“The silver lining to this unfortunate story is that this should be a temporary downturn in the impacted coastal areas of Florida and Texas," Berson said. "We should see delinquency rates normalize in coming quarters, which will help to boost the national outlook, perhaps back into positive territory."
There are some positives
There is some more good news; job growth and rising employment rates have offset some affordability concerns. Delinquency rates - aside from those areas affected by hurricanes - are also low.
Berson also says that most metros across the country are healthy.
"Job growth and incomes remain strong across the country, helping to maintain healthy markets on a regional level," Berson said. "We did, however, see an uptick in the number of local housing markets that slipped from positive to neutral, but that was expected given sustained rapid price increases in those areas.”
The top 10 metro areas in the index, in order, are: Casper, Wyo.; Farmington, N.M.; Alexandria, La.; Canton-Massillon, Ohio; Springfield, Ohio; Cedar Rapids, Iowa; Montgomery Co., Pa.; Trenton, N.J.; Killeen-Temple, Texas; and, Lawrence, Kan.
The bottom 10 are: Bismarck, N.D.; Victoria, Texas; Anchorage, Alaska; Lewiston, Idaho-Wash.; Corpus Christi, Texas; Billings, Mont.; Pueblo, Colo.; San Jose-Santa Clara, Calif.; Kennewick-Richland, Wash.; and, Nassau/Suffolk Co., N.Y.
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