Insignificant Price Gains Indicate Stagnation
Home price improvements which first generated hope that the mortgage market had started to head out of the crisis are once again indicating a status quo or dubious overall recovery with few exceptions.
In June CoreLogic, Santa Ana, Calif., reported a modest 1.4% year-over-year increase in U.S. home prices when distressed sale prices were included.
Excluding distressed sales, the CoreLogic Home Price Index shows year-over-year prices increased by only 0.2% in June and 0.5% in May, indicating that at best, monthly gains are simply preserving the status quo.
What is consistent about the overall picture is that home prices increased for the fifth consecutive month.
Nonetheless, the CoreLogic Home Price Index also shows that in June—compared to May 2010 when home prices increased by 3.7% year-over-year—the 2.3 percentage point deceleration from May "is very large by historical standards."
Furthermore, "the deceleration was most pronounced" not only in distressed segments of the market, but also in more expensive markets raising red flags in line with growing fears that the crisis is now expanding into jumbo loans.
According to CoreLogic chief economist, Mark Fleming, home price volatility and collateral risk remain very high in times when "the stabilization phase and policy intervention" that peaked in the spring of 2009 "has run its course."
As the economy "remains weak through the fall," he expects these factors to translate into further, moderate declines in home prices.
June highlights show that if distressed transactions are taken into consideration, the peak-to-current change in the national HPI from April 2006 to June 2010 was down 28%. Once the distressed property impact is taken out, the peak-to-current change in the HPI for the same period decreases to 20%.
But while the country overall and some of the problematic states face the status quo, California and a handful of other states are moving ahead.
Rankings of the top five states with better price improvements confirm empiric insights from mortgage lenders and servicers who say that of the top four most problematic states, California is the only state that has seen improvements.
California ranked third among states with the highest price appreciation in June despite distressed sales. The difference was that if including distressed sales prices increased 5.9%, when distressed sales are excluded, the price increase is 4.4%.
Meanwhile, Nevada topped the list of states with greatest depreciation in June when excluding distressed sales at 6.8%, followed by Arizona at 5.8%.
As expected, other states with price appreciation gains were mostly on the East Coast, including Maine, Virginia and the District of Columbia, with the exception of South Dakota, which posted the highest price appreciation in June at 6.9% including distressed sales and 6.3% when excluding distressed sales.