Study: Housing Market Wavers But Doesn’t Retreat

Recent data from Nationwide’s Health of Housing Markets Report demonstrates worsening of housing market sustainability, but the situation may be temporary or at least not indicative of a prolonged slump.

For the first time since 2010, Nationwide’s proprietary Leading Index of Healthy Housing Markets does not forecast a positive housing sector outlook.

The index, the insurance and financial services firm pointed out, is a forward-looking measure of housing market sustainability. The dip into neutral territory hinges largely on deteriorating housing affordability as well as a sluggish pace of household growth.

“Housing affordability concerns have been building within the housing market for several years,” said David Berson, Nationwide svp/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.”

Natural disasters also colored the market outlook. Damaged homes and displaced households raised mortgage delinquency rates in several metropolitan areas across 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.”

On the upside, job growth and rising wages have boosted housing demand despite rising affordability concerns. Also, aside from the localized hurricane impacts, serious delinquency rates remain low and suggest a healthy consumer balance sheet as regards mortgage debt.

Despite the neutral outlook rating, Berson said that most metro areas across the country maintain a healthy housing market.

“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.”