Lender Processing Services Inc. (LPS) has announced that its LPS Applied Analytics division updated its home price index (LPS HPI) with residential sales concluded during February 2012. "Our HPI shows an increase in seasonally adjusted prices this month for the first time since March 2010, and for only the third time in five years,” said Raj Dosaj, vice president of LPS Applied Analytics. “There have been signs of price declines slowing for a few months now, and our estimates for next month are flat to slightly positive. Without a pickup in sales volumes from their current anemic levels, it’s hard to be more optimistic that the market may be nearing the end of its fall."
The updated LPS HPI national home price for transactions during February 2012 increased 0.2 percent to a level on par with those seen in June 2003: $195,000.
“Reasons for caution are clear, as we’ve been here before," said Dosaj. "Non-seasonally adjusted prices increased for a few months in early 2009, 2010 and 2011—trends that all ended by summer, after which all the gains—and then some—were lost. As is true this month, those temporary increases were on low sales volumes—about 30 percent lower than at any point since 1998. Furthermore, the inventory of distressed homes remains high, which will continue to put a drag on prices.”
The LPS HPI January report estimated that February’s change would be approximately -0.3 percent based on the better-than-estimated price movement reflected in January numbers. However, estimates of this nature are subject to market shifts, and in this case, the -0.3 percent estimate did not reflect the positive changes in the economy that were evident after the months’ complete sales data was available. The actual change for February was +0.2, representing a .5 variance from the estimate.
During the period of most rapid price declines, from April 2007 through April 2009, the LPS HPI national home price fell at an average annual rate of 9.3 percent. The break of the post-bubble price movements into two periods, observable in the updated HPI last month, is clearer in the seasonally adjusted HPI this month. The slowest declining trend lasted from about April 2009 to April 2010, dates which are marked in Figure 1. This interval differs somewhat from our previous report because the seasonally adjusted data make the turning points less ambiguous.
The expiration of the first-time homebuyers tax credit in April 2010 marks the start of a steadier decline in house prices. Of the more than 585 MSAs the LPS HPI now covers, prices increased for all of the MSAs (199) in 20 states. In addition, while average prices did not increase for all MSAs in the remaining states, prices increased in a total of 334 MSAs. This is the first LPS HPI report in which the majority of MSAs covered by LPS data had increasing prices.
Among the MSAs for which both LPS and the Bureau of Labor Statistics provide data, average prices decreased during February only for the following MSAs in California: Los Angeles, San Diego and San Francisco. Four MSAs saw increases of one percent or more month-over-month: Honolulu; Portland, Ore.; Seattle and Tampa. Pittsburgh is the only MSA that, with clear seasonal variations, has seen its average house price rise continuously since January 2005.
The difference between foreclosure sale and short sale prices, now reported in the updated LPS HPI, provides an interesting perspective on the state of the national housing market. Historically, the difference between foreclosure- and short-sale prices has been notable—10 percent and more.
In general, borrowers undergoing short sales are motivated to do so to protect their credit to the extent possible and tend to maintain better condition of their properties than borrowers undergoing foreclosure.
In some parts of the country this is still the case. However, the task of managing the large number of distressed properties in the market today is immense, which may, in some cases, contribute to suboptimal pricing of some distressed properties.
