Is it time for Real Estate Investors to Find a New Niche? - Clear Capital
HDI Market Report & Forecast

Is it time for Investors to Find a New Niche?

By April 4, 2016 No Comments

As most markets continue the status quo, drops in performance for the low price tier may signal an end of the tremendous gains once seen in low tier investments.

The April Clear Capital Home Data Index (HDI) Market Report releases recent and granular data through March 2016, providing insights into housing price trends and other leading indices for the real estate market at the national and local levels.

Overall, national and regional performance remains unchanged except for a few key segments – namely the low price tier and several under-performing MSAs.

  • Providence, RI – the nation’s top performing metro market from last month – with 1.6% quarterly growth – is notably missing from this month’s top 15 highest performing markets, with quarterly growth falling more than 0.6%. Aside from this positive shakeup, the nation’s top performing MSAs have seen little to no change in quarterly performance in the last month, which is perhaps indicative of an overall industry shift from the lull of winter to the more active spring season. Seattle, WA is currently the fastest growing MSA in the nation at 1.8% quarterly price growth, an uptick of 0.2% from last month’s figures. While the nation’s top markets are holding fairly steady, many of the lowest performing markets have continued to see decreases in quarter-over-quarter growth through the end of March. The four lowest performers (Rochester, Memphis, Milwaukee, and Birmingham) have seen downticks in quarter-over-quarter growth from our previous report, each falling 0.2%.
  • Both nationally and regionally, quarterly growth performance has seen little change since the end of February 2016. On the national level, quarterly growth is still positive at 0.5% while regionally, the West remains on top with 0.9% quarter-over-quarter growth. The Northeast and Midwest are each reporting only 0.3% quarterly growth, while the South splits the difference at 0.6% QoQ growth.
  • One interesting phenomenon occurring on the national level is a notable change in growth by price tier. We’re used to seeing the low price tier (lowest 25% of home sales) dominate the mid (middle 50% of home sales) and top (highest 25% of home sales) tiers in terms of QoQ growth, but the most recent quarterly growth figures show all three tiers hovering around the 0.5% mark. Data through the end of March presents a low tier QoQ growth rate that is only 0.4% higher than that of the highest priced market tier. This is definitely a significant departure from the typical pattern on the national level the past several years, where low tier quarterly growth has consistently outpaced the top tier by an average of 1.5%, even reaching a difference of 2.0% in November 2014.


“As the winter real estate seasonal slowdown seems to be winding down, the numbers through the end of March are somewhat dichotomous. Most of the nation’s top performing markets have seen very little change in performance since last month and have continued to grow throughout the last quarter, despite the winter slowdown in activity. The nation’s lowest performing markets, however, appear to be much less able to resist the effects of the winter slow season even still as quarterly growth continues to decrease. Separately, we are beginning to see two very different ends of the national market, the low and top tiers, start to converge potentially toward a more homogenous pattern of growth. Although this drop in performance for the low price tier may indicate a more sustainable model of affordability for first time homebuyers, it may also plant doubt and uncertainty, especially with the investors – such as the REO to rental investors – who have previously taken advantage of the rapid growth of the tier. Even as price growth for all tiers remains in the black, it may be time for investors to find a new niche in the industry. Perhaps we will see REO or rental investments take a rise,” states Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital.



Graph 1. Change in price by tier through March 2016. Source: Clear Capital®


 National and Regional Markets
Market Qtr/Qtr% +/- Yr/Yr Distressed
National 0.5% 4.7% 14.7%
West 0.9% 7.4% 10.3%
Northeast 0.2% 1.6% 13.0%
South 0.6% 5.1% 17.7%
Midwest 0.3% 4.0% 16.6%

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


 Highest Performing Major Metro Markets
Rank Metropolitan Statistical Area Qtr/Qtr% +/- Yr/Yr Distressed
1 Seattle, WA — Tacoma, WA — Bellevue, WA 1.8% 11.6% 10.8%
2 Tampa, FL — St. Petersburg, FL — Clearwater, FL 1.4% 10.9% 23.9%
3 Phoenix, AZ — Mesa, AZ — Scottsdale, AZ 1.4% 8.7% 11.0%
4 Denver, CO — Aurora, CO 1.3% 11.1% 6.7%
5 Nashville, TN — Davidson, TN — Murfreesboro, TN 1.3% 8.4% 10.4%
6 Portland, OR — Vancouver, WA — Beaverton, OR 1.3% 10.0% 11.1%
7 Orlando, FL 1.3% 9.3% 25.5%
8 Miami, FL — Ft. Lauderdale, FL — Miami Beach, FL 1.2% 10.2% 22.1%
9 Sacramento, CA — Arden, CA — Roseville, CA 1.2% 8.8% 11.6%
10 Jacksonville, FL 1.2% 8.6% 27.4%
11 Los Angeles, CA — Long Beach, CA — Santa Ana, CA 1.1% 7.6% 9.0%
12 Houston, TX — Baytown, TX — Sugar Land, TX 1.1% 8.0% 3.1%
13 San Diego, CA — Carlsbad, CA — San Marcos, CA 1.1% 7.2% 8.9%
14 San Francisco, CA — Oakland, CA — Fremont, CA 1.1% 8.2% 7.1%
15 Charlotte, NC — Gastonia, NC — Concord, NC 1.0% 7.0% 10.2%

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


 Lowest Performing Major Metro Markets
Rank Metropolitan Statistical Area Qtr/Qtr% +/- Yr/Yr Distressed
1 Rochester, NY -0.9% -1.9% 14.7%
2 Memphis, TN -0.7% -2.1% 25.9%
3 Milwaukee, WI — Waukesha, WI — West Allis, WI -0.5% 3.5% 17.8%
4 Birmingham, AL — Hoover, AL -0.4% 0.0% 16.5%
5 Richmond, VA -0.1% 3.0% 16.1%
6 Virginia Beach, VA — Norfolk, VA — Newport News, VA 0.1% 1.4% 19.8%
7 Pittsburgh, PA 0.2% 2.7% 12.1%
8 Tucson, AZ 0.3% 4.4% 16.6%
9 Honolulu, HI 0.3% 4.2% 8.0%
10 Philadelphia, PA — Camden, NJ — Wilmington, DE 0.3% 2.6% 18.7%
11 Dallas, TX — Fort Worth, TX — Arlington, TX 0.3% 7.7% 2.6%
12 Baltimore, MD — Towson, MD 0.3% 1.9% 26.8%
13 Dayton, OH 0.4% 3.5% 20.9%
14 Cleveland, OH — Elyria, OH — Mentor, OH 0.4% 4.6% 19.4%

Chart 3. Lowest Performing Major Metro Markets through March 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.

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.
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