Housing market cools off in 'welcomed evolution' of recovery

The heat is coming off home prices as winter closes in and the year winds to an end, but it could indicate a return to sustainable growth

The heat is coming off home prices as winter closes in and the year winds to an end, a new report has indicated.

The Clear Capital Home Data Index Market Report has shown a moderation in home prices over November. While prices have still seen year-over-year growth, the pace has eased as summer buying activity gives way to a winter slow down, the report suggested.

Home price growth over the quarter edged down slightly from 11% year-over-year growth to 10.8%. November national quarterly growth was 1.8%, a significant decline from the previous quarter's 3.3% growth.

“As the year comes to a close, make no mistake, home prices across the country are cooling from the red-hot 2013 recovery,“ said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital. “Though some market observers may take this as a sign of a deflating bubble, we see this as a natural, and welcomed evolution on the horizon of the new housing landscape. Since the market trough in the fall of 2011, national prices are up 17%, undoubtedly a strong resurgence in overall prices. Yet national prices today are back to where they were in 2003, indicating that overall the housing market is at pre-run-up norms."

Villacorta said the easing housing market indicated a safer level of recovery.

"Understandably, many current homeowners would like to see hot gains continue for some time to come. Market participants, however, are better served by a cooler and more sustainable recovery. Moderating gains will create a stable market, instilling confidence in a broader base of buyers. And as we know all too well, meteoric rises and subsequent falls in prices create increasing risk of all types. That's not to say all markets will continue a slow and steady assent. Next month, we release our 2014 forecasts and expect to see some interesting trends at the metro market level. Interestingly, for some metros, future declines are not out of the question.”