After three months of home price stability, Clear Capital revealed dim news for the housing industry through the end of January.
According to the Truckee, Calif.-based analytic providers latest report, home prices on a year-over-year basis decreased by 2.6% through January, slightly worse than the 2.1% value drop experienced in December. There was also a 1.6% quarter-over-quarter loss, more than one basis point in lost value than the prior month.
The Midwest was the hardest hit region with prices dropping 4% at the end of January, substantially higher than the 0.4% loss the area suffered the previous month. All the other regions had quarter-over-quarter decreases of less than 1%.
“Looking at the latest data through January, home prices remained relatively unchanged with the exception of the Midwest,” said Alex Villacorta, director of research and analytics at Clear Capital. “Although prices at the national level continue to slide due to pressure from the Midwest, the lower priced segments of several specific markets are bucking the trend and seeing appreciation, suggesting that recoveries could be occurring from the bottom up.”
One of the main reasons why prices continue to fall is the increase of REO sales across the country, from 24.8% in December to 25.4% at the end of January. In particular, the Midwest had a 1.5% uptick in REO saturation over the past quarter bringing its total to 31%. However, the west saw a decrease in REO sales over the last year going from 38% in the first quarter of 2011 to 31% today, Clear Capital said.
There was wide volatility in home prices for a variety of markets due to seasonality, local differences in REO saturation and overall demand. Only three MSAs had value gains more than 2%, led by Birmingham, Ala. at 4.3%, then Phoenix, Ariz. at 3.2% and Washington D.C. at 2.1%. All 15 of the top performing markets avoided quarterly losses this month, but a third posted gains of less than 1%.
For the worst performing markets, 40% of the cities are located in the Midwest led by Detroit which had a 15.5% drop in prices and a 9.7% increase in distressed sales bringing it to 51.8%. Milwaukee saw its values fall 7.7%, while Dayton went from being the best performer in December to the sixth worst market through January with a 4.5% decrease in home prices due to a 2% rise in its REO saturation.
“When we look at the strength in the bottom tier of prices, the volatility within the metro markets, the rapid changes in direction with certain regions, and relative stability in others, these factors underscore the economic and market fragility that remains a dark cloud over housing prices,” Villacorta said.
