Clear Capital has released its monthly Home Data Index (HDI) Market Report, with the news that U.S. home prices continue a downward trend. The latest HDI Market Report provides the most current data (through June 2011), and relevant analysis of how local markets performed compared to the national trend in home prices. Report highlights include:
►National quarter-over-quarter home price declines (-2.3 percent) were reduced by half from last month’s report, helped by stronger spring sales activity. National yearly price declines reach -7.6 percent, offset from last year’s first-time homebuyer tax credit-induced highs.
►U.S. real estate-owned (REO) saturation rate slipped to 33.9 percent, down 0.6 percent from last month’s report.
►Quarterly home price change of -13.2 percent keeps the Detroit Metropolitan Statistical Area (MSA) as the lowest performing market for the fifth consecutive month.
“The latest Market Report results through May suggest that home prices are starting to ease back from the heavy declines seen over the winter,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital. “We are still far away from the strong demand needed to fully turn things around for the housing market; however, it is clear from the initial spring sales data that prices are softening, suggesting stabilization in the market.”
National/four region market overview (May 2010-June 2011)
►National quarterly home price declines were reduced by half, dropping to -2.3 percent this month, compared to the -4.9 percent price change posted in last month’s report.
►National REO saturation remained high, but dropped 0.6 percentage points to 33.9 percent.
►Regional quarterly price declines also softened across the nation, with the Northeast, West and South regions all posting declines of less than two percent.
►Year-over-year home prices are down nationally 7.6 percent, matching price levels last experienced in 2000.
One month after reporting a nationwide double dip in home prices, quarter-over-quarter home prices are showing signs of improvement as the deep winter lows were replaced by more stable spring prices. This softening of price declines suggests prices are stabilizing as the typically stronger summer buying season approaches. Based on historical patterns, the non-REO segment increases its share of total sales volume in the spring and summer months, which is critical as past HDI Market Reports have shown the near perfect negative correlations between home prices and overall REO saturation.
The present leveling of quarterly declines is expected. All spring seasons, even since the 2006 downturn, have seen an increase in fair market sales volume (14 percent on average), compared to the preceding winter. The REO segment doesn’t typically follow a seasonal cycle because the release of distressed properties to the market is determined through the foreclosure process and sales driven by different marketing strategies (such as those who wish to liquidate within weeks, versus those with longer marketing horizons). With sale transactions still filtering in from the spring months, it is too early to determine if this spring will match historical averages. After this past dismal winter of volume and prices, spring sales will need to be high to achieve price gains typical of the summer buying season.
The seasonal rise in non-REO volumes is now merging with a new trend; Q4 2010, the median price for distressed properties crept upward to five percent, while REO sale volumes have moderated. This marks the longest gain in median price for REOs since the market correction began in 2006. This is a positive signal at minimum; it indicates buyers’ appetite for higher-end REOs. Even with elevated distressed activity, this introduces the potential for gains in spite of overall low volumes.