Clear Capital Reports Rust Belt Resurgence

Posted by Orb Staff on December 09, 2009 No Comments
Categories : Residential Mortgage

Seasonal softening in the housing market this fall continues, placing the nation's quarterly gains at a modest 1.4%, according to Clear Capital's Home Data Index Market Report, which includes data compiled through Nov. 27. That's less than half the 3.7% returned last month, and nearly five percentage points less than the 6.3% gains reported for September.

All four regions continued to show quarterly gains this month, with the spread in gains narrowing again, reflecting more consistent price changes among the regions. Particularly encouraging is the West region which continues to see moderate price gains among its largest and highly REO-influenced markets. Prices grew 2.3% in the Midwest, 1.5% in the West, 1% in the South and 0.9% in the Northeast.

‘The modest and improving yearly changes we're seeing at the national and regional levels show that many areas have sustained stable price levels for nearly all of 2009 after the dramatic falloff in prices in the preceding three years,’ says Alex Villacorta, senior statistician at Clear Capital. "Yet, the continued rolling quarter declines experienced over the past two months have helped confirm that seasonal influences have returned.’

The best-performing major markets continued to experience quarterly home price gains, further minimizing yearly losses. The Lake Erie cities of Detroit and Cleveland top this month's highest-performing metropolitan statistical areas, with 14.1% and 12.8% gains, respectively.

‘Even with a potential increase in REO saturation rates, many markets are still showing strong evidence of stabilizing, indicating signs of a price bottom,’ Villacorta adds.

While the seasonal cycles are still eclipsed by the magnitude of declines since the market peaked in 2006, the return to seasonality this winter could expose the dynamics of REO inventories, Clear Capital says. The traditionally slower winter season is associated with a reduced number of home sales and an increase in marketing times. REO properties, on the other hand, are typically priced to sell in a given time frame, regardless of season.

The net result of combining the two dynamics of seasonal downturn and REO property liquidations is likely increased REO saturation rates in the winter months. It's important to note that these increased REO saturation rates should not necessarily be interpreted as an increase in REO volume. Declining REO saturation rates during the winter are more difficult to achieve and any such decrease would be seen as a very good sign that demand has returned to the marketplace. Even modest increase in REO saturation rates this winter, more than likely would not signal an end of the recent recovery.

Illustrating what could be a good sign of things to come this winter, national REO saturation rates did continue a downward trend this month, dropping another 1.1 percentage points to 26.9%.

SOURCE: Clear Capital

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