August 12, 2010
Clear Capital, a premium provider of data and solutions for real estate asset valuation, investment and risk assessment 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.
“Home prices continue to show positive growth from the first quarter of the year,” said Dr. Alex Villacorta, senior statistician, Clear Capital. “This trend indicates that the initial upward momentum created by the tax credit expiration is being sustained.”
“While quarterly gains are showing strong momentum across the country, these recent price advancements are the latest turn in a volatile housing market that has seen “W” shaped price trends over the last two years. An interesting exception to this pattern is the West region, which has seen a stable and sustained growth since the trough of the downturn in the first quarter of 2009,” added Villacorta. “Despite the up and down behavior of prices since the worst of the housing downturn, national prices are still up 13.6%, providing a cushion against potential future declines and the start of a double-dip.”
National/Four Region Market Overview (July 2009 – July 2010)
Stability in the housing market has been elusive across the nation over the past few years, but amid this volatility, the West has emerged with relatively stable home prices compared to the other three regions. The West’s quarterly appreciation has ranged from -1.6 to 2.7% since the start of 2010. In contrast, appreciation ranges in the Midwest (-9.4% to 14.7%) and South (-4.2% to 7.0%) regions represent more dramatic price swings during the same period, while the Northeast (-4.4% to 6.9%) still trails the West, but is becoming more stable.
While many external factors (including unemployment and investor activity) contribute to current price trends, the effects of the recent home buyer tax credits are seemingly magnified within the lower-priced markets of the Midwest, while reduced in the higher-priced coastal markets. To illustrate, the recent tax credit’s cap of $8,000 contributes a larger share of the purchase price for a home in the Midwest and South where the median home price is just below $150,000, than in the higher-priced East and West regions where median prices typically top $210,000. In some local markets where prices dip below $100,000, the effects of the tax credits are even more pronounced. Compared to last month’s report, national home prices experienced an improved quarter-over-quarter price gain of 7.9%. At varying magnitudes, this pattern of improving quarterly gains was present across all four regions. Nationally, REO saturation continued its steady decline, falling to 22.7%, a 1.9 percentage point drop from last month’s report, and 19.8 percentage point drop from its peak in the first quarter of 2009.
Metro Markets (July 2009 – July 2010)
The large quarter-over-quarter gains reported last month continue upward influenced by the tail end of the home buyer tax credits. However, slowing year-over-year gains among twelve of the fifteen highest performing major markets above indicate this growth hasn’t maintained last year’s momentum. Elevated volatility continues in these markets as quarterly prices jumped an average of 6.3 percentage points, and only New Orleans, La., Pittsburgh, Penn., and Detroit, Mich. improved their yearly price gains from last month’s report.
Cleveland, Ohio and Memphis, Tenn. remain atop the highest performing markets this month, with Cleveland leapfrogging Memphis for the top position. Note this list is largely comprised of markets from the Midwest and South, and none of the West’s more stable markets are present. The combined $142,000 median sale price for these markets, including substantially lower-priced markets in Michigan, Ohio, Missouri and Tennessee, suggests the home buyer tax credits had increased influence over these markets during this past rolling quarter.
REO saturation continued to exert less influence among the highest performing markets, dropping an average 2.7 percentage points from last month’s reported rates. The Ohio markets of Columbus and Dayton led the way, experiencing a five percentage point decline in REO saturation rates.
The exclusive presence of positive quarterly gains within this month’s lowest performing major markets list is especially notable given that the majority of these markets are among the more troubled real estate markets of California, Florida and Arizona. With a quarterly appreciation spread of only 2.1 percentage points, the price increases within this group of markets was remarkably stable when compared to the highest performing major markets which experienced a 19.7% spread. Additionally, REO saturation rates showed improvement, declining in all the lowest performing markets, while yearly gains did begin to slow in-line with the national pattern.
Baltimore, Md. saw the largest quarter-over-quarter improvement in home prices compared to last month’s report, rising from a -1.8% price change to a 2.9% price change this month. This was sufficient to cut yearly losses to 2.7%, allowing Baltimore to join Miami, Fla., Honolulu, Hawaii, Las Vegas, Nev., and Riverside, Calif. as the five markets with improving yearly price trends. The remaining ten markets saw their year-over-year price trends slow by an average rate of 1.4 percentage points from those observed last month.
Micro Markets (July 2009 – July 2010)
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 Charlotte, N.C. micro markets have demonstrated greater stability than the nation as a whole. In the face of the economic downturn that cut home prices nationally by an average of 31.6% since the national peak of the housing market in mid-2006, Charlotte managed to delay home price declines until mid 2007 (ultimately experiencing a -13.1% price change). Over the last year, Charlotte’s 2.5% price change also undershoots the national 8.1% gain. This general stability extended to many of Charlotte’s micro markets, although some of the nuances of market timing shift price changes among Charlotte’s individual markets.