Clear Capital: Prices hold steady despite rush of REO's

by 06 Mar 2012
Year-over-year losses are at lowest levels since April 2011, quarterly prices virtually unchanged. TRUCKEE, Calif. – Mar. 6, 2012 – Clear Capital (www.clearcapital.com), a premium provider of data and real estate asset valuation, investment and risk assessment, today released its Home Data Index™ (HDI) Market Report with data through the end of February 2012. The HDI Market Report uses a broad array of public and proprietary data sources to include data current up through the previous month offering the most timely and relevant data and analysis available. March report highlights include:
  • Year-over-year home prices for the nation are down, with quarter-over-quarter prices remaining very stable.
  • All regions showed improvements in quarterly and yearly prices, while three out of four saw upticks in REO saturation.
  • Top 15 MSAs resilient against notably higher REO saturation, and showing higher average gains than last month.
  • All of the lowest performing MSAs saw quarter-over-quarter losses, but softer than in February.
“Home prices across the nation saw light levels of depreciation in February, consistent with the trend we have seen over the last several months,” said Dr. Alex Villacorta, Director of Research and Analytics at Clear Capital. “However, the Northeast, Midwest, and West improved performance against last month’s quarterly declines in light of increases in REO saturation, which is unusual and encouraging.” “With this uptick in REO activity, we'll be keeping a very close eye on the effects of the Attorneys General settlement with servicers, as it could dramatically change the flow of REO properties moving through the foreclosure process and significant impact values in the near future. “The good news is the improvements in the job market, stronger consumer confidence, and the heightened activity of investors - often with cash - in the lower price tiers. These effects put upward pressure on prices, and could be in play with the resiliency we’re seeing in prices against increasing REO this month,” Villacorta added.
Regional Market Overview
[caption id="attachment_7287" align="alignleft" width="632" caption="Regional Market View"]Regional Market View[/caption] Prices Weaker, But Putting Up a Good Fight
  • The nation’s housing market lost less than 2% of its value year-over-year, showing an increased stability.
  • The West and Midwest are still losing ground in year-over-year performance, with losses significantly above the other regions and the nation’s average.
  • Quarterly numbers across all regions and nation showing softer losses (all under 2%) as compared to previous months.
  • All values for all regions are improved over last month, despite mostly higher levels of REO saturation.
Although national home prices went down -1.9% year-over-year, the loss represented the lowest level of decline in over 10 months. The national short term numbers were also better than recent months with a loss of only -0.6% quarter-over-quarter, very close to the sixth month performance, and highlighting the short term stability we’ve seen over last four months. At the regional level, short term numbers were all slightly negative, with the largest hit being in the Midwest with a -1.8% drop in values. This region is still fighting hard against broader issues such as higher unemployment and REO saturation than the rest of the nation, and the winter season slow down that tends to hit the Midwest relatively hard. The West posted a relatively high level of year-over-year price depreciation, but showed a higher degree of stability in quarterly numbers, which is a positive sign for the region which has struggled over the last year. The Northeast continues to show relative strength with small, but positive growth in year-over-year and 6 month values, along with very low REO saturation. And the South posted very little change at all in its short term and long term numbers. Three out of four regions saw increasing levels of REO saturation but fought hard against the usual and often dramatic downward pressure on prices it brings. In fact, the regions saw higher REO saturation, the seasonal effects of winter, and an unsettled political environment (election year) but resisted these negatives effects surprisingly well. Price stability in this environment indicates the presence of positive forces, which could be the improving unemployment numbers, an increase in investor activity, and an increase in overall demand. The chart below shows the change in quarter-over-quarter prices, against the change in REO saturation since last month’s report and the total REO saturation for the region.
Region   Change in Q/Q Prices   Change in REO Saturation   Total REO Saturation
West   -0.4%   0.8%   32.1%
Midwest   -1.8%   2.1%   32.2%
Northeast   -0.1%   1.0%   8.8%
South   -0.2%   -0.6%   23.7%
Nation   -0.6%   0.2%   25.8%
The chart shows the relationship between prices and REO saturation with the Midwest showing the largest increase in REO saturation and the largest drop in short term prices. The rest of the numbers line up expectedly, with notable exception of the South which is showing a small decrease in REO saturation along with a small decrease in prices. This could be a red flag for the region, but as both numbers show less than 1% change, further observation will be needed to see if these trends continue. With the exception of this quarter, national REO saturation declined over the last year, providing evidence to suggest banks might have put the brakes on processing foreclosures as they waited for further clarity on regulatory guidelines, and in particular, the Attorneys General settlement with servicers. Read full article

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