U.S. Home Prices Continue Plunge, Says Clear Capital Report

U.S. Home Prices Continue Plunge, Says Clear Capital Report

Residential News » Residential Real Estate Edition | By Michael Gerrity | November 9, 2010 3:55 PM ET

According to Clear Capital's latest monthly Home Data Index Market Report (HDI) national U.S. home prices have dropped 5% quarter-over-quarter.

"Although nationally, price trends are showing significant decreases, it is critical for policy makers, investors, and other users of home price data to understand that price dynamics at local levels differ significantly from the macro trends," said Dr. Alex Villacorta, Senior Statistician, Clear Capital. "Our Home Data Index is unique in its ability to provide timely insight across price tiers―at both national and local levels."

Report highlights include:

  • National/Four Region Overview: National home prices have changed -5.0% quarter-over-quarter. In fact, looking at national home prices since their mid-August peak, price declines are even more dramatic, changing -6.8%.
  • Home prices as a nation remain 7.7% above their 2009 lows, but six of the largest local markets are presently experiencing a home pricing double dip (defined as prices dropping below their record lows experienced at the worst of the housing market crash).
  • Metropolitan Statistical Area (MSA) drilldown: Local markets exhibited wildly differing sensitivities to the current housing climate: some in the South and Midwest regions are in double-dip territory, while bright spots emerge on the East Coast.
  • Micro Market Analysis: The Washington, D.C. MSA bucked negative national home price trends, posting positive quarterly and yearly price changes.

"For example, all six major metropolitan areas in California are out-performing both national and West region numbers in terms of yearly gains," added Villacorta. "Conversely, four of the top markets in Florida are either in or very near double-dip territory, even though national prices remain nearly eight percent above 2009 lows. So, while national home price trends gauge overall home price movement, regional, metro and local housing markets will continue to respond differently to distressed inventories and national policy."

National/Four Region Market Overview (Oct. 2009 - Oct. 2010)

U.S. Home Prices Continue to Fall Aggressively

  • National home prices have changed -5.0% quarter-over-quarter. In fact, looking at national home prices since their mid-August peak, declines are even more dramatic, changing -6.8%.
  • The West (-3.1%) and South (-4.7%) regions showed similar quarterly price changes as the national trend; though the western MSA of Honolulu, Hawaii (0.3%) over performed and southern MSAs in New Orleans (-15.8%) and Atlanta (-13.4%) turned in big declines.
  • The Midwest region (-8.7%) underperformed the national quarterly trend, with Columbus       (-13.7%) and Dayton, Ohio (-10.9%) leading the way with double-digit quarterly declines.
  • The Northeast region (-2.2%) outperformed the national quarterly trend, with New York, N.Y. and Bridgeport, Conn. posting gains; though Providence, R.I. posted a nearly double-digit negative price change of -9.1%.

Looking closer at national quarterly pricing trends, 18 states have declines higher than five percent, while 29 states experienced quarterly price changes that outperformed the national mark. This is significant because even though a majority of the states outperform the nation, declines in those 18 states are so severe that it brings the overall market average down.

In contrast to the national price changes, local markets often tell a different story. When studied at a much more granular, local level, the view was not always bad; yet in select cases, much worse. Several of the larger markets in the West region continue to maintain positive yearly price gains well above the national average. Similarly, Northeastern economic centers have outperformed the national quarterly trend, managing to delay a return to quarterly declines. The lower cost areas of the Midwest have largely underperformed the national trend while the South is mixed, with both over-performing and under-performing markets. Given the local nature of real estate, these differences were not surprising.

Another example of how national numbers can differ from local markets is by looking at where we are as a nation related to facing a double dip in home prices (home prices that drop below their record lows at the worst of the housing market crash are considered to have "double dipped"). Although nationally, we remain 7.7 percent above double dip territory, six local markets are presently experiencing a double dip.  Atlanta, Ga., Birmingham, Ala., Portland, Ore., Seattle, Wash., Tucson, Ariz., and Virginia Beach, Va. have all recently broken through for new home price lows. But those markets aren't the only ones suffering. Fourteen additional markets are within five percent of double dip lows; and another seven are within 10 percent of fresh lows.

Metro Markets (Oct. 2009 - Oct. 2010)

Select Local Markets Say "No" to Price Declines, For Now

  • Washington, D.C. and New York stand out with both quarterly and yearly price gains.
  • Western markets of Honolulu, Hawaii, and the California markets of San Jose, Los Angeles, Riverside, San Diego, Sacramento, and San Francisco maintain their yearly price gains by solid margins.

Contrary to the national downward trend for home prices, two-thirds of this month's highest performing markets remained in positive year-over-year territory. This trend is an example of how important it is to receive and inspect local market information, and not just rely on national and regional level information.

In addition to the employment centers of Washington, D.C. and New York City, local markets out West show the benefit of last year's steady demand in the distressed segment, maintaining average positive yearly gains of 6.9 percent. The South region was also represented by the coastal markets of Baltimore, Md., Miami, Fla. and Raleigh N.C. No Midwestern markets made this month's highest performing markets list.

While the effect of deteriorating conditions was evident with both quarterly and yearly measures slowing across all markets, the performance of these markets remain well above the national average. The top four markets on the list avoided quarterly price declines altogether, and even New Haven, Conn. (no. 15 on the list), experienced only a price change of -2.5 percent (half the national rate of decline) for the quarter.

Lowest Performing Localities Doubling Down

  • The markets in New Orleans, La., Columbus and Dayton Ohio, and Atlanta, Ga. are experiencing quarterly declines more than double the national rate.
  • REO saturation rates spiked sharply in a handful of local markets, a contrast to the more muted national uptick.

Similar to the highest performing major markets, local prices in the lowest performing markets differ greatly from the national numbers and sometimes their own region―telling an even grimmer tale of home price declines. These markets have proven more sensitive to the current market forces; with several markets experiencing quarterly declines more than double the national rate. Many consist of lower-priced markets that reacted positively to the tax credits of the last eighteen months, and are now giving back the short term gains, and then some.

While regional trends do provide a broad measure of the market, exceptions are the norm. Phoenix, Ariz., for example, saw a return to price declines in excess of the national and regional quarterly benchmarks. Prices in Phoenix dropped 6.1 percent for the quarter, and 1.3 percent for the year. Milwaukee, Wis., Tucson, Ariz., Birmingham, Ala., and Minneapolis, Minn. also saw REO saturation rates increase by more than three percentage points. Of these four markets, all but Minneapolis saw price declines in both quarterly and yearly measures.

Micro Market Analysis (Oct. 2007 - Oct. 2010)

This section highlights a single market every month with a deeper dive into how the micro- and macro-markets relate to each other, providing additional sub-ZIP code, census-tract-level data.

Looking Local: The District Ignores Recent National Home Price Declines

  • The Washington, D.C. MSA posts 2.0% quarterly and 6.7% yearly price changes, respectively.
  • Despite the District's yearly price gains, 26% of the census tracts (groups of around 1,500 homes) experienced yearly price declines.
  • The variability of Washington, D.C. home prices is a great example of why it's critical to gain insight into local pricing.

Regional, metro and even local housing markets respond differently to various economic conditions--and should be scrutinized carefully. Over the past three years, Washington, D.C. has tracked closely with the national home pricing trend, matching the price troughs in early 2008 and 2009. However, historical agreement doesn't necessarily assure similar direction or timing going forward. The District's 2.0 percent quarterly price change has extended by more than two months beyond the national trend where prices have fallen.

For additional local perspective of the Washington, D.C. market, Clear Capital turned to experienced members of the company's well-trained, on-the-ground national network of more than 40,000 real estate professionals. Clear Capital partners with this network daily to perform thousands of residential property valuations including appraisals, appraisal reviews and broker price opinions.

"The greater Washington, D.C. market might be doing better than the rest of the country because of its proximity of the federal government, and the solid job base for companies doing business for the government," said Ben Puchalski, real estate sales agent from Washington, D.C. "The tax credit definitely eliminated some of the inventory problems in D.C., but we've seen a slow down since it ended."

REO saturation rates in the District have revealed an inverted trend to home prices, with peaks in REO saturation found at each of the District's price troughs. More recently, as REO saturation in the District continues to fall, prices in the District have risen.

Within the Washington, D.C. MSA, which overall has seen prices rise 6.7 percent for the year, we find 26 percent of the census tracts (groups of around 1,500 homes) experiencing yearly price declines. On the positive end of the scale, 41 percent of the census tracts have experienced quarterly prices increases greater than the MSA's 2.0 percent change.

This variability within each market is a great example of why it's critical to understand prices at the local level. In Washington, D.C. more areas have indeed been affected by the current slowdown, but a majority of the micro markets are still showing strong yearly gains. It's very unlikely the District will continue to post positive gains going forward; however, it continues to demonstrate a resilience to price declines.

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