Clear Capital has released its Home Data Index (HDI) Market Report with data through May 2012. The Report uses an array of public and proprietary data sources providing the most timely and relevant analysis available from any vendor. Report highlights include: National home prices grew on both a quarterly and yearly basis for the first time since August 2010; regional performance improved across the board with the West, South and Northeast also seeing quarterly and yearly gains; the Midwest sustained declines, but milder declines since last month’s Market Report; and real estate-owned (REO)-only price performance helps shed light on why certain markets are performing better than others.
“National real estate prices in May have finally moved past the continued losses of the last few years. The subsequent stabilization pattern seen in recent months has progressed into the start of moderate growth,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital.
“While gains in national home prices over the quarter and year were minimal in May, there are encouraging trends continuing to play out and gaining momentum beneath the surface. Strength in REO-only price trends as well as some early indications of price gains spreading from low tier sectors to the mid, and higher-priced homes is helping confirm that the country continues to make progress on its recovery, and we are expecting to see improvements extend over the next several months.”
Short-term quarterly price trends picked up slightly at the national level, with appreciation of 0.4 percent turning into the first quarterly gain since November of 2011. The positive move at the broader market level is a reflection of the increasing strength at the regional level. Helping to support growth at the national level, the West saw a notable jump in prices over the quarter, taking the lead over all the regions with growth of 2.7 percent. The 2.2 percentage point gain over last month’s report not only put the West out in front of the other regions tracked, but it marks the first time in five months it saw a quarterly change in any direction greater than one percent.
Fueling the growth in the West appears to be a shift in demand. Over the past year, the real strength in the West was seen in the lower-priced home segment (those selling for $140,000 and less), likely indicating increasing investor demand for the lower priced units. While this trend isn’t unique to the West, recent growth in the mid and top-tier sectors of the market is. Over the last rolling quarter, mid and top tier segments not only saw growth (top tier is a price point over $347,000), but started catching up to the gains in the lower tier. This new dynamic is encouraging, as it shows a broadening demand and a stronger base for growth.
Meanwhile, the South recorded home price appreciation of 1.2 percent quarter-over-quarter, doubling the small gains of 0.6 percent reported on last month. Similarly, the Northeast matched the national level gains of 0.4 percent over the quarter, showing a modest uptick over the gains of 0.2% reported last month.
At the same time, the Midwest continued to absorb price declines. With prices declining only -2.0 percentover the quarter the magnitude of the declines are subsiding, as compared to last month’s quarterly losses of -2.7 percent.
Mirroring the quarter-over-quarter results, the longer-term yearly prices changes at the national and regional levels also showed improvement. The national results show a mild 0.1 percent gain, which is the first time the U.S. has seen yearly gains since September of 2010, when price growth was fueled by the first-time home buyer tax credit in place at the time.
The West, Northeast and Southern regions all recorded more substantial gains over the past year, of 1.9 percent, 1.6 percent and 0.9 percent, respectively. This appreciation in prices over last year was in part furnished by a stronger than typical winter home buying season, where mild weather got homebuyers out on the hunt and motivated earlier than usual.
The Midwest has clearly not seen the same strength of the other regions, with price declines of 3.1 percent over the last year. However, this month’s annual declines are softer than last month’s reported losses of -4.0 percent, which aligns with the moderating losses in quarterly trends as well.
Overall, the top 15 MSAs extended improvements. The average quarterly gain of this group was 4.5 percent, more than a full percentage point above last month’s average. Each top metro also recorded quarterly gains in excess of two percent, making May’s top 15 metros the strongest since September of 2011. This group is represented by a variety of regions, with the majority (40 percent) coming from the West.
The lowest performing MSAs averaged quarterly losses of 2.8 percent, but these declines tapered slightly over the average losses posted in last month’s report. Additionally, a third of the markets saw less than a -1.0 percent quarterly loss, which is another indication that losses are becoming less severe overall. It’s worth noting that Orlando has made an appearance on the lowest performing market list, with quarterly declines of only -0.2 percent. The region continues to show year-over-year price gains of 8.9 percent, however the slight cooling of short term price performance is far from confirmation that the metro’s progress has subsided.
