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TH E M R EP O RT | 51 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Appreciation vs. Demand Take a closer look at the trajectory of the housing market. T he housing market might experience a downturn, but it won't affect homeownership as much as the last housing crisis did, according to a study titled "Where Are We Now with Housing: A Report," by the Florida Atlantic University College of Business. The study investigated and compared the current status of U.S. housing at the national level with that of housing at the peak of the last cycle in July 2006. It revealed that while national housing prices were slightly overheated, residential real estate markets were experienc- ing minimal downward pressure on the demand for homeownership. "Understanding where housing stands today relative to the last cycle's peak creates more informed real estate consumers and perhaps a less bumpy ride this time around as the nation enters another housing cycle peak," said Ken Johnson, the author of the study and co-author of the Beracha, Hardin & Johnson Buy vs. Rent Index (BH&J). The study investigated scores of the CoreLogic Case-Shiller Home Price Index and the BH&J. It found that housing prices were at 7.3 percent above their long- term pricing trend compared to 31 percent at the peak of the last housing cycle. In terms of downward pressure on housing demand, the study found that at the end of the last cycle the BH&J Index indicated an extreme downward pressure on homeownership with a score of 1.00. Comparatively, this time around, the index reflected a score of 0.039 suggesting only minimal pressure on homeownership demand. "It looks like we're in for more of a very high tide, as opposed to a tsunami, as residential prices peak in this latest cycle," Johnson said. "At a minimum, we can ex- pect flatter housing price growth. At worst, we could experience price declines slightly below the long-term pricing trend." Where Home Values Are Headed With home price growth softening, here's what the months ahead may hold. I t might not be a crash, but home appreciation is certainly poised for a slowdown in 2019 according to the Vero- FORECAST. Published by Veros Real Estate Solutions, the quarterly forecast revealed that the rate of appre- ciation in 2019 would drop to 3.9 percent in some of the most populous markets of the U.S. reflecting a half-percent drop from 4.5 percent that was reported in the previous quarter's report. "This amount of change from one quarter to the next is significant," said Eric Fox, VP of Statistical and Economic Modeling at Veros. "While the market fundamentals remain solid and we still expect the overall housing market to remain healthy, there is a definite slow- ing down of most markets from last quarter's update." Looking at the factors that were likely to impact home values, the report said that overall interest rates "appear to be softening the forecasts in many markets by 1-2 percent" over what they would have been if these rates had remained flat as in the past years. "At the same time, housing supply is a key discriminator between our top and bottom forecast per- forming markets," Fox said. "We do not see a crash, but simply a slowing down as the strength of the past few years is expected to dissipate somewhat in most markets," he said. The report indicated that the number of depreciating markets has increased from three to five percent since last quarter's update. This means, 18 markets, twice as many as in the third-quarter 2018 report, are predicted to depreciate through December 1, 2019. Farmington, New Mexico which was expected to depreci- ate 2.9 percent topped this list, followed by three cities in Illinois Danville (1.4 percent); Decatur (1 percent); and Peoria (1 percent). Grand Forks in North Dakota (0.8 percent) rounded off the bottom five markets. The forecast also revealed a dimin- ishing trend of big cities dominat- ing the housing market values. This quarter's forecast indicated that a majority of the top and bottom 10 housing markets were small to modest-sized cities with an average population of 260,000. Four states dominated the top 1o markets. They included Idaho, Washington, Texas, and Colorado. The housing market in Boise City, Idaho was projected to show maximum appreciation at 9.5 percent by December 1, 2019, followed by Olympia, Washington (8.8 percent); Midland, Texas (8.7 percent); Idaho Falls, Idaho (8.6 percent); and Odessa, Texas (8.4 percent) rounding off the Top 5 markets. Hotspots such as Denver, Las Vegas, Reno, and Dallas will ap- preciate at lower rates this year, the report predicted. "This amount of change from one quarter to the next is significant." —Eric Fox, VP of Statistical and Economic Modeling, Veros "At a minimum, we can expect flatter housing price growth. At worst, we could experience price declines slightly below the long-term pricing trend." —Ken Johnson, Co-author of the Beracha, Hardin & Johnson, Buy vs. Rent Index