Statistical Indicators

Home Prices

Posted on Thursday, October 7, 2010

Clear Capital Sees Evidence of Early Winter Slowdown in Home Prices
By: Carrie Bay 10/06/2010 DSNews

Data released by Clear Capital Thursday shows that quarter-over-quarter home prices were down 0.2 percent in September compared to the previous month’s reading. It’s the first time in months national home prices have slipped into negative territory in the company’s survey.

Based on the California-based valuation firm’s market data, home prices in three of four regions of the country – West, Midwest, and South – posted quarterly declines last month. The Northeast was the only region to see prices rise at 2.1 percent.

All four regions did retain year-over-year price gains, but Clear Capital says signs of a slowdown are already becoming apparent and likely mark an early onset of what is typically a weaker winter season for home sales and property values.

“Compared to the softening quarterly gains we saw last month, the latest results of our Home Data Index indicate a substantial price correction has taken place in many

major markets,” said Dr. Alex Villacorta, senior statistician for Clear Capital. “With the effects of the recession still being felt by homebuyers and sellers, the lack of demand is causing strong markets to lose their upward momentum, while sending weak markets into double dip territory.”

Villacorta says nationally, home prices are still 10 percent above their 2009 lows, so the risk of carving out a new trough this year remains small.

Commenting on the news of foreclosure suspensions by three major mortgage servicers – GMAC Mortgage, JPMorgan Chase, and Bank of America – Villacorta says the ensuing delays will certainly help to slow the rate of new distressed inventory coming onto the market.

But he says any positive effect this might have on home prices will be countered by the traditional winter slowdown, which seems to be starting early this year. In the long-term, Villacorta insists that it’s probable the current moratoriums will weigh heavy on the market by adding to the backlog of distressed inventory, ultimately placing more pressure on lenders to release their REOs.

According to Clear Capital, REO saturation – which the company defines as the percentage of bank-owned homes sold as compared to all properties sold – is likely to drift downward in the near-term as a direct effect of the largest servicers’ foreclosure freezes.

Last month, the REO saturation rate did trend upward to 23.2 percent from the August reading of 22.1 percent, but Clear Capital called this a “modest increase in light of the larger price movements.” REO saturation rates peaked in the first quarter of 2009 at 41 percent.

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