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No Bounty For Housing’s Harvest.
Consumer confidence remains a hardship on stabilizing market.
TRUCKEE, Calif. – October 6, 2014 – Clear Capital, the premium provider of data and solutions for real estate asset valuation and collateral risk assessment, today released its Home Data Index™ (HDI) Market Report with data through September 2014. Using a broad array of public and proprietary data sources, the HDI Market Report publishes the most granular home data and analysis earlier than nearly any other index provider in the industry.
- As we head into fall, the Western region could be the canary in the coal mine. September home price data marks the 11th straight month of moderating gains. Nationally, yearly gains decreased from a high of 11.7% in October 2013 to just 7.8% through September 2014. This trend is amplified in the West, where annual gains are cut nearly in half, from highs of 19.5% in October 2013 to 10.9% in September 2014. If the ongoing moderation in the West, still the recovery leader, continues at its current pace it will be a foreboding sign of future declines.
- Metro market trends will continue to keep buyers on their toes, as national and regional recoveries wane at varying velocities. Detroit is a great example. Discounted opportunities helped push prices up 21.9% year-over-year in September. Meanwhile the Hartford MSA is experiencing declines, -1.1% over the quarter and -0.4% over the year, highlighting the type of market performance disparity that characterizes the present market. Each of the lowest performing 15 markets posted less than a 1% gain over the last quarter. This group remains subject to short term declines which could eventually turn into yearly losses.
- Distressed inventory is no longer reinforcing a strong housing market recovery. Discounted distressed deals continue to dry up, down from a national high of 38.4% in 2011 to just 16.5% in September 2014. While this is generally a positive sign, distressed sales helped drive the investor demand that kick started the recovery. Historically, we’ve observed rising prices as distressed saturation declined. While reduction of distressed saturation is a healthy move for markets long term, over the short term it removes a key demand segment at a time when full buyer momentum has yet to be established. The correlation between drastic declines in price gains and declines in distressed saturation is most visible in the West. Distressed saturation was at an all-time high of 50.5% in 2009 falling to just 12.6% in September 2014. As distressed saturation fell, so did price gains. Yearly price gains in the West have fallen to 10.9%. This nearly 50% drop in price gains since October 2013 is in sync with declines in distressed saturation.
- Perception is reality—for consumer confidence in housing. Future home price gains are more dependent on owner occupied purchases as the rising price floor and dwindling discounted deals leave investors with fewer opportunities. Owner occupied demand is in part driven by consumer sentiment, among other key drivers, like jobs. While consumer sentiment levels reached a 14-month high in September, according to the University of Michigan’s Consumer Sentiment index, momentum has tempered—like home prices. Consumer sentiment yearly growth rates have softened seven percentage points over the last seven months. Each of the last two times consumer sentiment rates have seen negative yearly changes, prices have declined (see graph 1). As housing seeks stability, moderating rates of consumer confidence and price gains foreshadow a third potential dip.
- Contact Brian Opsal for your September 2014 file of the Top 30 MSAs or to access our data on the Bloomberg Professional service by typing CLCA <GO>.
“Heading into fall, home price gains continue to drop,” said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital. “September marks the 11th month of moderating gains with home price levels back in line with long run averages. With less fuel stoking investors’ fire and the consumer yet to feel confident in the market, we expect at best either a return to pre-bubble norms or a departure into negative territory.
If improvements in the job market continue to support a rise in consumer confidence, it’s likely that owner occupied buyers will be encouraged to pick up the slack in housing demand, once held steady by investors. While sentiment data is improving as of late, we’ve yet to see sentiment reach pre-recession levels. Even less encouraging, the index’s rate of improvement is softening, alongside home price growth.
Without stronger rates of growth in consumer confidence, price gains could easily fall past the normalized annual rates of growth between 3%-5% and back into negative territory. This has the risk of invoking a negative feedback loop between falling prices and reduced confidence from potential homebuyers. While the housing market has enjoyed abnormally high rates of growth during the last two and a half years of recovery, prices are back to long run historic levels, signaling an effective end to the correction to the correction. True market growth will be dependent on consumer confidence and re-engagement which will be tested over the next few months.”
|National and Regional Market|
|Market||Qtr/Qtr % +/-||Yr/Yr||Distressed Saturation|
Chart 1: National and Regional Markets – September 2014. Source Clear Capital
|Highest Performing Major Metro Markets|
|Rank||Metropolitan Statistical Area||Qtr/Qtr % +/-||Yr/Yr||Distressed Saturation|
|1||Detroit, MI — Warren, MI — Livonia, MI||2.9%||21.9%||20.9%|
|2||Birmingham, AL — Hoover, AL||2.7%||8.0%||15.1%|
|3||New Orleans, LA — Metairie, LA — Kenner, LA||2.3%||4.3%||15.2%|
|4||San Francisco, CA — Oakland, CA — Fremont, CA||2.2%||15.1%||7.5%|
|5||San Jose, CA — Sunnyvale, CA — Santa Clara, CA||2.1%||12.7%||4.5%|
|7||Atlanta, GA — Sandy Springs, GA — Marietta, GA||1.8%||14.0%||18.4%|
|8||Riverside, CA — San Bernardino, CA — Ontario, CA||1.7%||15.5%||15.0%|
|10||Miami, FL — Ft. Lauderdale, FL — Miami Beach, FL||1.6%||13.6%||28.2%|
|11||Cleveland, OH — Elyria, OH — Mentor, OH||1.6%||8.9%||19.9%|
|12||Milwaukee, WI — Waukesha, WI — West Allis, WI||1.6%||3.1%||17.3%|
|14||Sacramento, CA — Arden, CA — Roseville, CA||1.5%||12.8%||14.6%|
Chart 2: Highest Performing Major Metro Markets – September 2014. Source Clear Capital
|Lowest Performing Major Metro Markets|
|Rank||Metropolitan Statistical Area||Qtr/Qtr % +/-||Yr/Yr||Distressed Saturation|
|1||Hartford, CT — West Hartford, CT — East Hartford, CT||-1.1%||-0.4%||15.0%|
|4||Baltimore, MD — Towson, MD||0.2%||2.1%||20.3%|
|5||Philadelphia, PA — Camden, NJ — Wilmington, DE||0.4%||3.6%||16.8%|
|6||Boston, MA — Cambridge, MA — Quincy, MA||0.4%||8.1%||9.1%|
|7||NY, NY — No. New Jersey, NJ — Long Island, NY||0.5%||5.0%||11.7%|
|8||Raleigh, NC — Cary, NC||0.6%||3.4%||8.1%|
|9||Washington, DC — Arlington, VA — Alexandria, VA||0.6%||5.9%||13.6%|
|10||Phoenix, AZ — Mesa, AZ — Scottsdale, AZ||0.6%||8.3%||13.5%|
|12||Charlotte, NC — Gastonia, NC — Concord, NC||0.7%||4.8%||11.5%|
|13||St. Louis, MO||0.7%||6.5%||19.3%|
|14||Virginia Beach, VA — Norfolk, VA — Newport News, VA||0.8%||4.7%||19.6%|
Chart 3: Lowest Performing Major Metro Markets – September 2014. Source Clear Capital
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) 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›.
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