Year-End Rate Hikes Threaten Ongoing Growth in California; With a Lower Barrier to Entry in the Midwest and South, Home Buyers and Investors May Start Dreamin' Elsewhere
RENO, NV--(Marketwired - October 05, 2015) -
"The strong continued growth in the Midwest, South and West, in particular the California Bay Area, suggests strong consumer and investor confidence has been seemingly unaffected by talk of looming interest rate hikes by the Fed," says Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital. "However, if and when interest rates do rise, likely occurring by the end of 2015, it will be timed with a decrease in real estate market activity typical through the fall and winter seasons.
"This unfortunate pairing will most likely cause a slowdown in price growth for most markets, which already seems to be in motion across much of the country. In bubble markets like San Francisco, San Jose and Los Angeles, growth has been unsustainably high in the last year fueled in large part by the white-hot rental market and low inventory environment. In fact, current prices in San Francisco County are far beyond any historic level on a real basis and are doing so with some of the lowest level of activity this county has seen.
"Given the current obstacles to enter these markets, a rate hike is likely to have a negative impact, specifically making it more expensive for first-time home buyers to engage. In addition to high home prices, these markets also suffer from high rents, which prevent potential home buyers from saving for down payments. With the barrier to entry too high, a younger segment of potential home buyers may start to turn their sites eastward-to the Midwest and South, where affordability continues to be within reach.
National and Regional Markets | ||||||
Market | Qtr/Qtr | Yr/Yr | Distressed Saturation | |||
National | 0.8% | 5.2% | 16.2% | |||
West | 1.2% | 7.3% | 11.4% | |||
Northeast | 0.2% | 2.1% | 13.9% | |||
South | 0.8% | 5.8% | 19.7% | |||
Midwest | 0.9% | 4.6% | 18.6% | |||
Chart 1. National and Regional Markets Through September 2015. Source: Clear Capital
Highest Performing Major Metro Markets | ||||||||
Qtr/Qtr Rank | Metropolitan Statistical Area | Qtr/Qtr | Yr/Yr | Distressed Saturation | ||||
1 | San Jose, CA - Sunnyvale, CA - Santa Clara, CA | 2.5% | 9.4% | 3.9% | ||||
2 | Detroit, MI - Warren, MI - Livonia, MI | 2.1% | 12.5% | 16.7% | ||||
3 | Las Vegas, NV - Paradise, NV | 2.0% | 8.1% | 17.9% | ||||
4 | Atlanta, GA - Sandy Springs, GA - Marietta, GA | 1.8% | 9.1% | 15.3% | ||||
5 | Miami, FL - Ft. Lauderdale, FL - Miami Beach, FL | 1.8% | 10.1% | 25.0% | ||||
6 | Denver, CO - Aurora, CO | 1.7% | 12.0% | 5.7% | ||||
7 | Orlando, FL | 1.7% | 8.0% | 28.4% | ||||
8 | Jacksonville, FL | 1.7% | 7.8% | 28.2% | ||||
9 | Portland, OR - Vancouver, WA - Beaverton, OR | 1.6% | 8.2% | 9.1% | ||||
10 | Dallas, TX - Fort Worth, TX - Arlington, TX | 1.6% | 10.0% | 3.4% | ||||
11 | Seattle, WA - Tacoma, WA - Bellevue, WA | 1.6% | 10.6% | 10.3% | ||||
12 | Charlotte, NC - Gastonia, NC - Concord, NC | 1.6% | 7.5% | 8.8% | ||||
13 | San Francisco, CA - Oakland, CA - Fremont, CA | 1.5% | 8.8% | 6.0% | ||||
14 | Sacramento, CA - Arden, CA - Roseville, CA | 1.5% | 7.4% | 10.6% | ||||
15 | Tampa, FL - St. Petersburg, FL - Clearwater, FL | 1.4% | 9.0% | 27.0% | ||||
Chart 2. Highest Performing Major Metro Markets Through September 2015. Source: Clear Capital
Lowest Performing Major Metro Markets | ||||||||
Qtr/Qtr Rank | Metropolitan Statistical Area | Qtr/Qtr | Yr/Yr | Distressed Saturation | ||||
1 | Providence, RI - New Bedford, MA - Fall River, MA | -0.8% | -6.2% | 12.8% | ||||
2 | Baltimore, MD - Towson, MD | -0.2% | -2.3% | 23.8% | ||||
3 | Memphis, TN | 0.1% | 2.7% | 23.4% | ||||
4 | Pittsburgh, PA | 0.1% | 11.5% | 8.6% | ||||
5 | Dayton, OH | 0.3% | 2.2% | 18.0% | ||||
6 | Rochester, NY | 0.3% | 2.2% | 9.0% | ||||
7 | Washington, DC - Arlington, VA - Alexandria, VA | 0.3% | 1.8% | 11.8% | ||||
8 | Milwaukee, WI - Waukesha, WI - West Allis, WI | 0.5% | 4.3% | 15.4% | ||||
9 | Boston, MA - Cambridge, MA - Quincy, MA | 0.5% | 1.5% | 7.6% | ||||
10 | Virginia Beach, VA - Norfolk, VA - Newport News, VA | 0.5% | 4.2% | 17.0% | ||||
11 | New Orleans, LA - Metairie, LA - Kenner, LA | 0.6% | 4.8% | 16.9% | ||||
12 | Louisville, KY | 0.6% | 4.4% | 13.0% | ||||
13 | Chicago, IL - Naperville, IL - Joliet, IL | 0.6% | 5.8% | 23.1% | ||||
14 | Birmingham, AL - Hoover, AL | 0.6% | 5.1% | 14.5% | ||||
15 | Oxnard, CA - Thousand Oaks, CA - Ventura, CA | 0.6% | 4.6% | 8.4% | ||||
Chart 3. Lowest Performing Major Metro Markets Through September 2015. Source: Clear Capital
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