A Shrinking Opportunity in the West - Clear Capital - HDI™ Market Report
HDI Market Report & Forecast

A Shrinking Opportunity in the West

By August 8, 2016 No Comments

Most markets across the nation remain relatively unchanged, but a longer term dip in distressed saturation levels in the West indicates a strong recovery at the expense of overall affordability.

  • Regionally, the South and West are continuing to dominate our list of the nation’s Highest Performing Major Metro Markets, with only one of the top 15 markets located outside of these two powerhouse regions. Western markets are experiencing overall quarterly growth around the 1.4% mark, with several individual markets outperforming this average by almost half a percent. Southern markets are also experiencing overall growth that outpaces the national average of 0.7% quarter-over-quarter growth. Growth in the midwest has seen a small bump in performance over the last month, increasing 0.2% to 0.5% quarterly growth, while price increases are nearly non-existent in the Northeast, with quarterly growth upticking to from 0.0% to 0.1%.
  • Most performing markets appear to be holding steady since last month’s reporting, with the exception of Honolulu, HI, where growth has sharply increased from 1.2% in July to 1.6% in August. Tampa, FL remains the fastest growing major metro area in the country, with quarterly growth remaining high at 2.5% and annual growth at just under 14%.
  • While the West has been consistent in its outperformance of the rest of the nation for several years, the underlying composition of sales that are driving the soaring price growth has not matched this consistency. In the region’s top performing major metro markets, levels of distressed properties have steadily decreased much faster than that of the national average. While the national level of distressed properties is currently at 14.5%, cities like Seattle, San Diego, Honolulu, and Las Vegas are now below the 10% mark. In San Jose, distressed properties make up only 3.0% of overall sales in the market.

“Quarterly growth in most performing markets across the nation appears to be stabilizing, with few major shakeups month to month. One longer term trend we’ve been keeping our eye on has been the relatively rapid decrease in the distressed saturation levels in top performing western markets. Because distressed saturation levels are one of the key indicators of a market’s overall health, low frequencies of these sales in the market could be a sign of a healthy market. However, as REO and short sale properties become harder and harder to come by in the region, this could be a signal that affordability is continuing to plummet. This, coupled with an observed rapid increase in price and a potential uptick in interest rates in the near future, may spell trouble for the region in the coming months and years as low tier investors and first time homebuyers are continually shut out of major western markets,” states Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital.


Graph 1. Trend in Distressed Saturation Levels in Major Western Markets vs. National Markets. Source: Clear Capital®


 National and Regional Markets
Market Qtr/Qtr% +/- Yr/Yr Distressed
National 0.7% 4.8% 14.5%
West 1.4% 8.1% 10.0%
Northeast 0.1% 1.3% 14.5%
South 0.8% 5.4% 16.6%
Midwest 0.5% 3.7% 17.1%

Chart 1. National and Regional distressed saturation and changes in home prices from last quarter and last year. Data through July 2016. Source: Clear Capital®


 Highest Performing Major Metro Markets
Rank Metropolitan Statistical Area Qtr/Qtr% +/- Yr/Yr Distressed
1 Tampa, FL — St. Petersburg, FL — Clearwater, FL 2.5% 13.8% 19.7%
2 Orlando, FL 2.0% 11.1% 19.4%
3 Seattle, WA — Tacoma, WA — Bellevue, WA 1.9% 12.5% 8.1%
4 Dallas, TX — Fort Worth, TX — Arlington, TX 1.8% 10.3% 2.5%
5 Cleveland, OH — Elyria, OH — Mentor, OH 1.7% 7.7% 18.2%
6 San Jose, CA — Sunnyvale, CA — Santa Clara, CA 1.7% 9.7% 3.0%
7 San Diego, CA — Carlsbad, CA — San Marcos, CA 1.6% 8.0% 8.1%
8 Honolulu, HI 1.6% 4.9% 6.1%
9 Jacksonville, FL 1.6% 9.7% 21.2%
10 Riverside, CA — San Bernardino, CA — Ontario, CA 1.5% 6.9% 12.0%
11 Las Vegas, NV — Paradise, NV 1.5% 9.2% 16.6%
12 Denver, CO — Aurora, CO 1.5% 11.1% 5.5%
13 Miami, FL — Ft. Lauderdale, FL — Miami Beach, FL 1.5% 10.1% 18.0%
14 Sacramento, CA — Arden, CA — Roseville, CA 1.5% 9.5% 10.0%
15 Fresno, CA 1.4% 6.2% 13.5%

Chart 2. Highest Performing Major Metro Markets through July 2016. Source: Clear Capital®


 Lowest Performing Major Metro Markets
Rank Metropolitan Statistical Area Qtr/Qtr% +/- Yr/Yr Distressed
1 Memphis, TN -0.4% -3.7% 21.4%
2 Philadelphia, PA — Camden, NJ — Wilmington, DE 0.1% 1.2% 18.5%
3 Birmingham, AL — Hoover, AL 0.3% 0.1% 14.1%
4 Virginia Beach, VA — Norfolk, VA — Newport News, VA 0.4% 2.1% 16.6%
5 Pittsburgh, PA 0.4% 2.3% 10.4%
6 St. Louis, MO 0.4% 4.4% 16.7%
7 Dayton, OH 0.4% 3.7% 16.7%
8 Milwaukee, WI — Waukesha, WI — West Allis, WI 0.5% 3.2% 15.8%
9 Rochester, NY 0.5% -0.4% 13.3%
10 New Orleans, LA — Metairie, LA — Kenner, LA 0.5% 6.0% 13.8%
11 Baltimore, MD — Towson, MD 0.5% 3.4% 25.1%
12 NY, NY — No. New Jersey, NJ — Long Island, NY 0.6% 3.4% 14.2%
13 Louisville, KY 0.6% 4.1% 11.1%
14 Hartford, CT — West Hartford, CT — East Hartford, CT 0.6% 5.6% 19.0%
15 Richmond, VA 0.6% 4.0% 12.1%

Chart 3. Lowest Performing Major Metro Markets through July 2016. 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.

  • 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.
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