Waltham-based real estate analytics firm Pro Teck Valuation Services has released a new report which argues that the recent rise in national home prices is not another housing bubble in the making.
"The rapid recovery in home prices in a number of U.S. metros already had some observers to suggest that we are in another home price bubble," Tom O’Grady, CEO of Pro Teck Valuation Services and Michael Sklarz, principal of Collateral Analytics, said in a joint statement. "Our feeling is that while price increases have been sharp, they should be viewed as corrections to the overshooting of prices on the downside in the 2009-2011 period and not the beginning of new home price bubbles."
The firm has developed a "Bubble Indicator" which tracks the rate of change in asset prices to help predict developing bubbles. For example, an analysis of the U.S. stock market using the indicator showed that when prices more than triple over a five-year period, "a significant market top has occurred followed by overall stock market crashes," the pair stated. Recent price increases in U.S. housing are nowhere near those levels when looked at over a five-year span, the report says.
This month’s Home Value Forecast update also includes a listing of the 10 best and 10 worst performing metros as ranked by its market condition ranking model. The rankings are run for the single family home markets in the top 200 CBSAs on a monthly basis to highlight the best and worst metros with regard to a number of leading real estate market indicators, including: sales/listing activity and prices, months of remaining inventory (MRI), days on market (DOM), sold-to-list price ratio and foreclosure and REO activity.
The pair also hailed the arrival of the Cambridge-Newton-Framingham and Providence, R.I. metro areas to the list of top 10 best-performing metros this month. For July, every market in the top 10 exhibited positive trends in every one of the indicators that Pro Teck tracks, the firm noted. The indicators include declining inventory, lower inventory remaining, declining market times and lower distressed sales activity.
"Two new entrants to the [top 10] list are Cambridge, Mass and Providence, R.I. from New England, which is interesting because the Northeast had been lagging the nationwide real estate recovery," said Sklarz in a statement.
Pro Teck specifically highlighted Concord as a town likely to outperform the market in months to come. Home prices in Concord declined less during the best than in nearby towns, while the average Concord homeowner has greater equity in their home than those in nearby towns. "[O]ur home price forecast models call for [Concord] to continue to outperform the surrounding metro and move above its previous peak levels over the next several years," the firm wrote in the report.
