Real Estate Market

Clear Capital report hints at earlier housing recovery

by Broderick Perkins

(12/30/2011) Erate Exclusive - Home prices are still struggling year-over-year, falling 2.2 percent, but quarter-over-quarter home prices were steady, posting an increase of 0.3 percent, according to Clear Capital's Home Data Index Market Report using data ending in November 2011.

The quarterly change comes after another increase, 0.6 percent during the last quarter as quarterly price movements have become more aligned across the four U.S. regions with only 2.0 percentage points separating the highest performing region (Midwest at 1.2 percent) and the lowest performing region (West at -0.8 percent), Clear Capital reported.

Also, while the national year-over-year price dropped more than 2 percent, it showed improvement over last month's report (down 2.8 percent) and marks more than a year of consecutive months of yearly declines.

"With only a one percent drop in national home prices since January and virtually no change in prices over the last six months, strong evidence suggests the big swings that many market participants are accustomed to could become a thing of the past," said Dr. Alex Villacorta, Director of Research and Analytics at Clear Capital.

"Although many of the nation's major markets are experiencing no significant movement in prices, there are still several micro markets that are underperforming the overall market due to high levels of REO saturation (25 percent nationwide). As lien holders continue to process their foreclosures and the flow of REOs continue to come to market, it will be critical for industry participants to ensure they understand the micro economic nature of specific markets," Villacorta added.

The report appears to be more optimistic then recent studies.

• The Center for Responsible Lending's (CRL) "Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures" reported the five-year old foreclosure crisis has yet to reach the halfway mark and could last another five years, until 2017.

• A FICO survey of bank risk professionals found 49 percent of them not expecting prices to climb back to 2007 levels before the year 2020.

• John Burns Real Estate Consulting recently reported the rate of homeownership is likely to fall eight percentage points, from the peak of near 70 percent in 2005 to 62 percent in 2015, before it's all over. It will be 2025 before the homeownership rate returns to 67.1 percent, still well off the peak, according to Burns.

However, there are signs of hope in the improving REO sector in both the top and least performing markets.

Clear Capital reported the average REO saturation among the top performing 15 markets was steady at 21.6 percent, below last month's 22.8 percent and the national average of 24.6 percent.

The report said: "Moderation and tightness of price decreases and stability of REO saturation for the lowest performing markets provide for some degree of optimism for the market as a whole as we move into the softer winter buying season."

Villacorta added, "The overall market stability in this month's report gives me hope that housing markets are settling after a very turbulent two years."

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