Clear Capital: Home-Price Gains Shrink To 3.7%

Posted by Orb Staff on November 06, 2009 No Comments
Categories : Residential Mortgage

National quarterly home-price gains continue to slow as the winter season approaches, posting a 3.7% gain, according to Clear Capital's Home Data Index (HDI) Market Report, which covers data collected through Oct. 25. That's down from the 6.3% gain experienced a month earlier.

The national year-over-year price decline was trimmed another 1.5% from last month, producing single-digit losses for the second month in a row (-8.4%).

Clear Capital points to a reduced influence of the real estate owned (REO) property segment. October's national REO saturation rate declined to 28% – a 5.1% improvement since July.

"The continued decline in REO saturation rates, as well as an increase in the proportion of cash buyers in both distressed and fair market sales, are an encouraging sign of investor optimism coming into the traditionally slow months," says Alex Villacorta Sr., a statistician with the Truckee, Calif.-based firm. "If the home buyer tax credit is extended and possibly expanded, it could add even more momentum through the slow months to build up to a very strong spring in 2010, as more buyers are sensing that home prices truly have hit the bottom of the current cycle."

Quarterly price gains remain strong among the highest-performing major markets, helped by the continued decline in the percentage of total sales that are REO. Only New Orleans; Louisville, Ky.; and Cleveland saw increased REO saturation rates, and even then, the increases were slight (less than 0.5% each).

Excluding the additional 1% quarterly improvement in New Haven, Conn., all the markets experienced slowing quarterly price gains, continuing last month's general shift to more moderate gains. On average, the highest-performing major markets saw a decrease of 5.5% in their quarterly gains.

If this trend continues into the winter, it is possible that some of the current top performers will see single-digit quarterly gains or even quarterly declines by the new year, Clear Capital says. This plausible scenario, while a slowdown, would still represent a significant improvement from the extreme and broad price declines and elevated REO saturation levels experienced last winter.

Of particular note, the price spike seen in Cleveland has started to diminish, dropping to 26% for the quarter, while continuing to post a strong yearly price increase (50.4%). Cleveland returned a flat REO saturation rate as compared to last month, as well.

The lowest-performing major markets continue to reflect the relatively healthy changes that occurred across the nation in recent months, with only two modest quarter-over-quarter losses present. However, the similarly minor and reduced gains in these markets serve to caution that the market might experience a pause in price increases as winter approaches.

Raleigh , N.C., experienced the largest increase in REO saturation since last month, but its modest 1.4% increase reflects a general stability in these markets. Although five other markets – Seattle; Richmond, Va.; Jacksonville, Fla.; Charlotte, N.C.; and Tucson – experienced minor increases in REO saturation, the average increase was just 0.7%. The remaining nine markets saw declining REO saturation rates – generally seen as a positive sign – with a combined average reduction of 2.1%.

The Riverside, Calif., and Miami metropolitan statistical areas continue to experience improved results, having dropped from near the top to the bottom of the list over the past few months. Both are experiencing a much higher percentage of cash sales, which is indicative of heightened demand by investors for all property types, not just REOs.

Historically, these markets have seen cash sales account for less than 10% of all non-REO sales. Currently, Riverside is seeing 23.6% of all non-REO sales completed without financing (i.e., cash sales), and Miami is experiencing an even greater 30.3%. These high percentages in non-REO cash sales highlight the magnitude of investment activity that has spread beyond the REO segment, Clear Capital says.

SOURCE: Clear Capital

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