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Clear Capital Reports Resurgence in the Midwest Amidst Limited U.S. Home Price Gains
Detroit’s 14.1% quarterly price gain tops all major U.S. markets, surpassing five-month leader Cleveland (12.8%); while National quarterly home prices post modest 1.4% gain.
TRUCKEE, Calif. – Dec. 9, 2009 – Clear Capital, a premium provider of data and solutions for real estate asset valuation, investment and risk assessment, today released its Home Data Index™ (HDI) Market Report. Patent pending rolling quarter technology significantly reduces the multi-month lag time associated with other indices to help investors, loan servicers and individual buyers and sellers make more informed, timely and profitable decisions. This month’s report features data compiled through Nov. 27, 2009.
Report highlights include:
- National / Four Region Overview: National quarterly price gains are narrowed to a modest 1.4 percent; with the Midwest (2.3%), West (1.5%), South (1.0%) and Northeast (0.9%) all posting modest gains.
- Metropolitan Statistical Area (MSA) drilldown: The highest performing major markets continued to experience quarterly home price gains, further minimizing yearly losses. Lake Erie cities of Detroit, Mich. (14.1%), and Cleveland, Ohio (12.8%), top this month’s highest performing major markets. Softening seasonal home prices have returned most of the lowest performing major markets to negative quarterly results.
- Micro Market Analysis: Home price gains of 13.4 percent over the last two rolling quarters indicate prices in the Atlanta, Ga. MSA may have bottomed out and are beginning to recover.
The Clear Capital HDI Market Report offers the industry, investors and lenders a near real-time look at pricing conditions not only at the national and metropolitan level, but within local markets. Clear Capital data is built on the most recent data available from recorder/assessor offices, and then further enhanced by adding the Company’s proprietary market data for the most comprehensive geographic coverage available.
“The modest and improving yearly changes we’re seeing at the National and Regional levels show that many areas have sustained stable price levels for nearly all of 2009 after the dramatic fall off in prices in the preceding three years,” said Dr. Alex Villacorta, Senior Statistician, Clear Capital. “Yet, the continued rolling quarter declines experienced over the past two months have helped confirm that seasonal influences have returned.”
“Even with a potential increase in REO saturation rates, many markets are still showing strong evidence of stabilizing, indicating signs of a price bottom,” added Villacorta. “With the passing of the tax credit helping to strengthen the momentum through the winter, many buyers may find that this season is a good time to take advantage of record low prices.”
National/Four Region Market Overview (Oct. 29, 2008 – Nov. 27, 2009)
Seasonal softening in the housing market this fall continues, placing the nation’s quarterly gains at a modest 1.4 percent. That’s less than half the 3.7 percent returned last month, and nearly five percentage points less than the 6.3 percent gains reported for September. All four regions continued to show quarterly gains this month, with the spread in gains narrowing again, reflecting more consistent price changes among the regions. Particularly encouraging is the West region which continues to see moderate price gains among its largest and highly REO-influenced markets.
While the seasonal cycles are still eclipsed by the magnitude of declines since the market peaked in 2006, the return to seasonality this winter could expose the dynamics of REO inventories. The traditionally slower winter season is associated with a reduced number of home sales and an increase in marketing times. REO properties, on the other hand, are typically priced to sell in a given timeframe regardless of season.
The net result of combining the two dynamics of seasonal downturn and REO property liquidations is likely increased REO saturation rates in the winter months. It’s important to note that these increased REO saturation rates should not necessarily be interpreted as an increase in REO volume. Declining REO saturation rates during the winter are more difficult to achieve and any such decrease would be seen as a very good sign that demand has returned to the marketplace. Even modest increase in REO saturation rates this winter, more than likely would not signal an end of the recent recovery.
Illustrating what could be a good sign of things to come this winter, national REO saturation rates did continue a downward trend this month, dropping another 1.1 percentage points to 26.9 percent.
Metro Markets(Oct. 29, 2008 – Nov. 27, 2009)
All of the highest performing major markets continue to experience quarterly home price gains, further eroding yearly losses. Thirteen of the fifteen markets saw improvements in their yearly gains over last month. The magnitude of the quarterly gains demonstrates the dire state of the market a year ago, while the improvements in the yearly returns indicate markets are stabilizing.
A Lake Erie connection was made atop this month’s list of highest performing major markets. Detroit, which narrowly missed the highest performing markets list last month, ended Cleveland’s five-month reign as the highest performing major market by posting a 14.1 percent quarterly gain. Detroit’s strong quarterly price gain reduced its yearly price decline to -4.4 percent. One of the hardest hit areas in the country in regards to home price declines, Detroit’s large percentage home price gains this rolling quarter are reflective of the low prices still present in the area. When compared to the current median sale price of $63,000, Detroit’s 14.1% quarterly gain translates to an approximately $7,800 increase over last quarter’s median value.
Phoenix, Ariz., a longtime leader of the lowest performing major markets, moved into the highest performing list this month with solid quarterly gains (4.4%) offsetting its list-leading 23.8 percent loss for the year. Northern California’s Bay Area is well represented in this month’s highest performing list. Both the San Francisco (6.1%) and San Jose (4.5%) MSAs turned in solid gains, putting them within striking distance of eliminating yearly losses.
REO saturation rates decreased from last month in twelve of fifteen markets by an average 1.8 percent (New Haven, Conn.; Pittsburgh, Pa.; and Cleveland experienced minor REO saturation increases of 0.8, 0.3 and 0.1 percent, respectively). The continued general decrease in REO saturation across this list is a positive sign as we prepare to enter the winter months that, as stated previously, traditionally experience a rise in REO saturation.
The softening seasonal home prices have returned most of the major markets on the lowest performing list to negative quarterly results. These declines remain generally minor, however (less than 3.8%). Las Vegas, Nev. (-0.1%) was the only MSA on this list to see its quarterly price change improve from last month (-1.8%), enough to push it to tenth place this month from its top position on this list last month.
Raleigh , N.C. experienced the largest increase in REO saturation since last month, but its modest 1.4 percent increase reflects a general stability in these markets. Although five other markets (Seattle, Richmond, Jacksonville, Charlotte and Tucson) experienced minor increases in REO saturation, the average increase was just 0.7 percent. The remaining nine markets saw declining REO saturation rates, generally seen as a positive sign, with a combined average reduction of 2.1 percent.
While quarterly price changes continue to show slight dips into negative territory, annual price changes are improving. Every MSA except for Rochester, N.Y. saw yearly price improvements in this month’s report. This reflects the seasonal influence on the quarterly numbers, while the yearly numbers reflect a solid improvement over last year.
Fresno, Calif. has improved since it last appeared on this list three months ago. While still experiencing high REO activity (42.4%), Fresno’s -15.6 percent yearly price change is a substantial improvement over the -25.9 percent yearly price change and 48.2 percent REO saturation posted three months ago.
Houston, Texas; Raleigh, N.C.; and Las Vegas, Nev. saw the largest declines in REO saturation, 4.7, 3.5 and 3.3 percent, respectively. This late in the buying season, it’s a positive sign to see the lowest performing major markets continue to see declines in REO saturation, reduced yearly losses and significantly improved quarterly gains compared to one year ago.
Micro Markets (Oct. 29, 2008 – Nov. 27, 2009)
This section highlights a single market every month with a deeper dive into how the micro- and macro-markets relate to each other.
Home prices in the Atlanta, Ga. micro markets have returned to levels not seen in eleven years. Furthermore, if inflation is taken into account, current home prices would fall even farther below 1998’s market, placing today’s prices at a level not seen since 1994. While this picture is grim if considered by itself, it serves to highlight how discounted much of the Atlanta MSA has become. It also adds perspective into the 13.4 percent price gains experienced over the last two rolling quarters – a substantial number given the average quarterly gain over the past ten years was 1.7 percent.
While home price changes in Fulton County have generally outpaced DeKalb County over the past year (7.7% vs. -4.5%), the unincorporated area of DeKalb County just north of the county seat of Decatur (ZIP 30033) has demonstrated remarkable home price stability. Decatur, the best performing ZIP code among Atlanta’s micro markets, has experienced an 8.7 percent price gain this past year, and only a modest -3.5 percent change since home prices peaked in 2006. Decatur has benefited from low REO volatility, its proximity to Emory University, and immediate access to downtown Atlanta.
At the other end of the price performance spectrum lies Rex (ZIP 30273), an unincorporated part of Clayton County southeast of downtown Atlanta. Rex has an REO saturation rate twice as high as that of the greater Atlanta area, resulting in price changes of -38.9 percent over the past year. This annual price drop has added to Rex’s decline, which has now returned a -65.0 percent price change since this market peaked in 2006.
About the Clear Capital Home Data Index (HDI) Market Report
The Clear Capital HDI Market Report provides insights into market trends and other leading indices for the real estate market at the national and local levels. A critical difference in the value of the HDI Market Report is the capability of Clear Capital to provide more timely and granular reporting than nearly any other home price index provider.
The Clear Capital HDI Market Report
- Offers the real estate industry (investors, lenders, and servicers), government agencies, and the public insight into the most recent pricing conditions, not only at the national and metropolitan level, but within local markets as well.
- Is built on the most recent information available from recorder/assessor offices, and then further enhanced by adding the company’s proprietary streaming market data for the most comprehensive geographic coverage and local insights available.
- Reflects nationwide coverage of sales transactions and aggregates this comprehensive dataset at ten different geographic levels, including hundreds of metropolitan statistical areas (MSAs) and sub-ZIP code boundaries.
- Includes equally-weighted distressed bank owned sales (REOs and short sales) from around the country to give the most real world look of pricing dynamics across all sales types..
- Allows for the most current market data by providing more frequent updates with patent pending rolling quarter technology. This ensures decisions are based on the most up-to-date information available.
Clear Capital HDI Methodology
- Generates the timeliest indices in patent pending rolling quarter intervals that compare the most recent four months to the previous three months. The rolling quarters have no fixed start date and can be used to generate indices as data flows in, significantly reducing the multi-month lag time experienced with other indices.
- Includes both fair market and institutional (real estate owned) transactions, giving equal weight to all market transactions and identifying price tiers at a market specific level. By giving equal weight to all transactions, the HDI is truly representative of each unique market.
- Results from an address-level cascade create an index with the most granular, statistically significant market area available.
- Provides weighted repeat sales and price-per-square-foot index models that use multiple sale types, including single-family homes, multi-family homes, and condominiums.
About Clear Capital
Clear Capital (www.ClearCapital.com) is the premium provider of data and solutions for the mortgage finance industry. The Company’s products include appraisals, broker price opinions, property condition inspections, value reconciliations, automated valuation models, quality assurance services, and home data indices. Clear Capital’s combination of progressive technology, high caliber in-house staff, and a well-trained network of more than 40,000 field experts sets a new standard for accurate, up-to-date, and well documented valuation data and assessments. The Company’s customers include the largest U.S. banks, investment firms, and other financial organizations. Clear Capital’s home price data can be accessed on the Bloomberg Professional service by typing CLCA <GO>.
Address Level Cascade – Provides the most granular market data available. From the subject property, progressively steps out from the smallest market to larger markets until data density and statistical confidence are sufficient to return a market trend.
Home Data Index (HDI) – Major intelligence offering that provides contextual data augmenting other, human-based valuation tools. Clear Capital’s multi-model approach combines address-level accuracy with the most current proprietary home pricing data available.
Metropolitan Statistical Area (MSA) – Geographic entities defined by the U.S. Office of Management and Budget (OMB) for use by Federal statistical agencies in collecting, tabulating, and publishing Federal statistics.
Paired Sales Model – Weighted linear model based on repeat sales of same property over time.
Price Per Square Foot (PPSF) Model – Median price movement of sale prices divided by square footage over a period of time?most commonly a quarter.
Real Estate Owned (REO) Saturation – Calculates the percentage of REOs sold as compared to all properties sold in the last rolling quarter.
Rolling Quarters – Patent pending rolling quarters compare the most recent four months to the previous three months.
The information contained in this report is based on sources that are deemed to be reliable; however no representation or warranty is made as to the accuracy, completeness, or fitness for any particular purpose of any information contained herein. This report is not intended as investment advice, and should not be viewed as any guarantee of value, condition, or other attribute.
Vice President, Marketing