Home prices finally returning to normal
@CNNMoney March 5, 2013: 9:25 AM ET
NEW YORK (CNNMoney)
After years of wild swings, the U.S. housing market is slowly returning to normal.
The latest forecast from
Fiserv (FISV)
Case-Shiller predicts home prices will increase by an average
of 3.3% annually over the five years ending September, 2017.
Home prices: Biggest winners and losers
These cities will see the biggest swings in home prices
through the 12 months ending September 30, according to Fiserv's estimates.
| City | Forecast change |
|---|---|
| Medford, Ore. | 9.7% |
| Santa Fe | 8.1% |
| Billings, Mont. | 5.5% |
| Syracuse, N.Y. | 5% |
| Yuma, Ariz. | 4.8% |
| Orlando, Fla. | -8.3 |
| Merced, Calif. | -8.5% |
| Riverside, Calif. | -8.6% |
| Warren, Mich. | -9% |
| Miami | -10.7% |
Source: Fiserv
"2012 was the first year since 1997 that the
housing market has resembled something [close to] normal," said David Stiff,
Fiserv's chief economist. "For the past 15 years, home
price changes and sales
volumes have either been boosted by a bubble mentality or crushed by crash
psychology."
From 1998 until the housing bubble peaked in 2006, home
prices grew by 5% or more a year. But once the bubble burst, home prices
plunged, falling 30.5% through the end of September 2012. It wasn't until late 2011 that markets started to stabilize, according to Stiff. Between September 2011 and September 2012, average U.S. home prices rose 3.6%. By then, 62% of the 384 metro areas Fiserv tracks reported rising home prices, up from just 12.5% of all markets during the same period a year earlier.
Many of the metro areas hit hardest by the housing
bust recorded the biggest price gains during those 12 months. In Phoenix,
for example, prices climbed back by nearly 21%; prices in Detroit
rose almost 16%; and homes in San
Jose, Calif., gained 12.5%.
Values continued to decline on Long Island, N.Y.,
however, where prices fell 8.1% and where Stiff said the turnaround in median
income lagged the rest of the nation by about a year. Brunswick, Ga., also saw
declines, down 7.1%, as did Valdosta,
Ga, off 6.9%. Both areas saw jumps in foreclosures.
By the end of this year, Fiserv predicts that home
prices will be heading higher in almost every metro area it tracks. Medford,
Ore., is expected to gain 9.7% in the 12 months through September, the
highest of any city. Other big gainers are expected to be Santa
Fe, N.M., up 8.1%, Billings,
Mont., 5.5% and Syracuse,
N.Y., 5%.
Fiserv expects Miami
home prices to sustain a 10.7% loss over the same period, the largest drop of
any market. Stiff said a steady stream of foreclosures will keep prices soft in
the area during that time.
While Stiff said home price gains will be similar to those experienced back
in 1997, he noted the similarities stopped there. Currently, millions of homes
are either in foreclosure or on the verge of it.
Otherwise, there are many positive trends in
today's market, he said. Prices are extremely affordable and mortgage
rates are at or near historic lows. Overall, Fiserv
Case-Shiller expects stronger demand for housing, and the sector should, once
again, have a positive impact on the economy. 
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