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Clear Capital: Will Phoenix Rise Again? Not In The Foreseeable Future.
The housing recovery, in need of new heroes, looks to the West, but not for long.
TRUCKEE, Calif. – August 4, 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 July 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 opportunity for discounted deals dry up, so too does a portion of the recovery-driving demand. National yearly growth fell from 9.0% last month to 8.4% in July. Just as national home price growth continued to contract in July, so too followed distressed sales. As a percent of all sales, distressed sales fell to 18%, a stark reduction since its peak of 40.8% in March of 2011. The major shift in home sale type, from distressed to fair market, will continue to impact future growth potential for markets overall, and begs the question: Will home price gains continue to fall past the historical range of 3%-5% as discounted deals dry up? Or, will they stabilize to sustain moderate long term growth? Clear Capital’s forecast through 2015 shows national home prices will rise just 1.5%, indicating prices may not have the strength to stabilize within this historical range of growth.
- While the West continues to dominate regional gains with eight of the top 15 major metro markets, the MSAs within the region are not immune to the strong moderating patterns unfolding across the country. Each market has its own unique demand drivers, yet similarities exist. Some Western markets like Phoenix and Riverside are seeing a strong pull back from their investor-fueled first in, first out (FIFO) recovery paths while others, like San Jose and Seattle, are experiencing moderation alongside strong local economic foundations.
- Spoiler alert. Even though these outliers continue to see strong local economies drive demand, it may not be enough in 2015. The West is projected to see price declines of 0.8% through 2015, while the historically volatile Midwest could be home to the recovery’s next group of heroes, with leading forecasted growth of 3.4%.
- Glaringly missing from July’s Top 15 list is the recovery darling, Phoenix. Once the exemplar of a recovering market, Phoenix has suffered from the effects of waning investor demand. In July, Phoenix yearly price growth softened to 10.4%, while distressed saturation fell to 13.5%. This is a significant reversal from more than 60% distressed saturation in March 2011, and a cumulative recovery of 62.3% home price appreciation. Following these notable gains, Phoenix is nearly in line with 2004 price levels, off by just 5%, suggesting Phoenix is where it needs to be. But can it stay there through 2015? Forecasts show Phoenix should see 2.6% through 2015, a sobering, yet realistic, rate of stable growth for the market.
- Even the current recovery leader, Riverside, is going down the price path of Phoenix. Over the past two years, prices in the MSA have appreciated by a total of 53.2%, while distressed saturation has fallen from 68% to just 15.5%. Riverside’s quarterly and annual growth led the top 50 metro markets in July at 2.1% and 18.3%, respectively. Despite these seemingly strong growth trends, yearly growth in Riverside has fallen 6.6 percentage points from 25% at the start of 2014, and quarterly growth has been cut by more than half over the same timeframe. Forecasts through 2015 show expected losses for the metro of 1.1%, indicating Riverside could see continued moderation turn to losses in the near future.
- Contact Brian Opsal for your July 2014 file of the Top 30 MSAs or access our data on the Bloomberg Professional service by typing CLCA <GO>.
“The force of moderation in July trends raises questions around the market’s ability to sustain gains through 2015,” said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital. “Relatively speaking, a national yearly growth rate of 8.4% is not alarming, but it’s the path by which we got there that is of concern. Today’s annual rate is over three percentage points lower than it was at the start of the year, and recall that the summer is supposed to be the highlight of the housing cycle. At the metro level, we are taking notice of stronger drops, like in Riverside and Phoenix. Forecasts through 2015 indicate that there are several markets that are not going to be immune to declines, and with a national forecast of just 1.5% price growth over the next 18 months, there will not be much cushion for any sort of hiccup in the broader economy.
We expect growth rates to vary more significantly across markets over the next year as local drivers such as confidence and job opportunities ebb and flow. This will be a very unique time for the market as the level of investor activity gives way to the traditional home buying segment. Whether this segment is willing and able to make a commitment on a home purchase remains to be seen, but we know from history that if it were to happen this year, it would have happened by now.
With many markets moving past the driving forces and fallout of the bubble, we’ll see increasing numbers of metros across the country take their own path, with future declines and unsettled price dynamics all part of the new normal landscape.”
Graph 1: Riverside and Phoenix Yearly Price Growth
|National and Regional Market|
|Market||Qtr/Qtr % +/-||Yr/Yr||Distressed Saturation|
Chart 1: National and Regional Markets – July 2014. Source: Clear Capital
|Highest Performing Major Metro Markets|
|Rank||Metropolitan Statistical Area||Qtr/Qtr % +/-||Yr/Yr||Distressed Saturation|
|1||Riverside, CA – San Bernardino, CA – Ontario, CA||2.1%||18.3%||15.5%|
|2||San Francisco, CA – Oakland, CA – Fremont, CA||2.0%||17.8%||8.1%|
|3||Detroit, MI – Warren, MI – Livonia, MI||2.0%||18.4%||26.8%|
|4||Miami, FL – Ft. Lauderdale, FL – Miami Beach, FL||2.0%||15.4%||27.3%|
|5||Birmingham, AL – Hoover, AL||1.9%||5.9%||16.5%|
|6||Las Vegas, NV – Paradise, NV||1.8%||14.7%||24.6%|
|9||Los Angeles, CA – Long Beach, CA – Santa Ana, CA||1.6%||15.3%||10.8%|
|11||San Diego, CA – Carlsbad, CA – San Marcos, CA||1.6%||14.9%||11.4%|
|13||Seattle, WA – Tacoma, WA – Bellevue, WA||1.4%||11.4%||16.6%|
|14||Atlanta, GA – Sandy Springs, GA – Marietta, GA||1.4%||17.4%||20.4%|
|15||San Jose, CA – Sunnyvale, CA – Santa Clara, CA||1.4%||13.8%||4.8%|
Chart 2: Highest Performing Major Metro Markets – July 2014. Source Clear Capital
|Lowest Performing Major Metro Markets|
|Rank||Metropolitan Statistical Area||Qtr/Qtr % +/-||Yr/Yr||Distressed Saturation|
|1||New Orleans, LA – Metairie, LA – Kenner, LA||-1.2%||-2.7%||16.6%|
|2||Hartford, CT – West Hartford, CT – East Hartford, CT||-0.6%||1.9%||17.7%|
|3||Milwaukee, WI – Waukesha, WI – West Allis, WI||-0.1%||2.1%||20.9%|
|6||Baltimore, MD – Towson, MD||0.3%||2.6%||22.5%|
|8||Philadelphia, PA – Camden, NJ – Wilmington, DE||0.4%||3.8%||18.5%|
|9||Raleigh, NC – Cary, NC||0.4%||3.4%||9.0%|
|11||Charlotte, NC – Gastonia, NC – Concord, NC||0.5%||5.4%||13.1%|
|15||NY, NY – No. New Jersey, NJ – Long Island, NY||0.6%||5.7%||12.8%|
Chart 3: Lowest Performing Major Metro Markets – July 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 streamingmarket 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 ofmetropolitan 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 dynamicsacross 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 basedon 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. Therolling 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 otherindices.
- Includes both fair market and institutional (real estate owned) transactions, giving equal weight to all market transactions and identifying price tiers ata 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, andcondominiums.
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