Year-Over-Year Home Price Gains Remain Steady at 5.1%, Says Clear Capital Report

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Metro Markets (April 2009 - April 2010)

Honolulu, Hawaii saw quarterly prices rise to 3.3 percent, pushing it to the number one position on the highest performing major markets list for this month's rolling quarter. The San Francisco, Calif. MSA continues to lead the group in yearly price gains (20.4%), while maintaining a nearly flat quarterly price change of -0.4 percent. Overall, the growth in the number of markets with quarterly price declines and increased REO saturation rates was slowed. Eight markets managed to improve their quarterly numbers over last month's report and twelve saw decreased REO saturation rates. Decreasing REO saturation is typically seen as a positive sign, in terms of price, as home sellers compete with fewer bank owned properties, which are frequently listed at a discount.

Year-over-year price gains continued to improve among the set, including a 5.0 percentage point price change in the Las Vegas, Nev. MSA--the market with the largest yearly decline in the group. This leaves Las Vegas with a yearly price change of -7.2 percent. Overall, home prices in the highest performing markets have remained flat through the winter months, averaging quarterly gains of 0.2 percent, while yearly gains have averaged 7.4 percent.

If the federal tax credit from last fall is any indication, the end of the tax credit on April 30 suggests a let-down in home prices could follow in subsequent months. However, this timing coincides with the start of the spring home-buying season, providing reason to believe many of these markets will transition smoothly into the summer months. With REO sale volumes down nearly fifty percent from their peak in early 2009, and an expected springtime uptick in sale volumes at hand, there may be room in many of these markets to improve upon the minimal gains of winter.

With the best of the highest performing major markets only returning slight quarterly gains this winter, the lowest performing markets posted comparatively steep price declines. As a group, the fifteen markets on this month's list averaged a -11.1 percent price decline for the recent rolling quarter.

However, the short term picture for these markets has improved somewhat from last month, and while prices continue to fall, their drop is less dramatic than that of previous months. This provides an early indication that prices might be searching for a bottom, rather than starting a steeper decline, especially with the arrival of the spring buying season.

While quantifying the impact that increased sale volumes might have on prices is yet to be seen, it's clear that spring and summer mark the arrival of better conditions to the housing market, making it easier to move inventory. This is evident by increased sale volumes (averaging 30 percent off winter lows), throughout the steep declines of the last three years.

Compared to the highest performing major markets list which is largely made up of markets in the South and West regions, the lowest performing major markets are dominated by markets in the Midwest.

Micro Markets (April 2009 - April 2010)

This section highlights a single market every month with a deeper dive into how the micro- and macro-markets relate to each other.

Home prices in the District of Columbia (D.C.) area gained on average 8.4 percent over the last year. These gains ended what had been, by early 2009, a price decline of 42.8 percent since the market's peak in mid 2006. While the market as a whole has seen REO activity fall more than 17 percentage points from its peak of 39 percent in early 2009, local micro markets have experienced dramatic variability in the timing of peak REO sales activity-- and subsequently, price declines.

Following a steep run-up in prices that ended in the second quarter of 2006, the Woodbridge area near Dale City, Va. (ZIP code 22193) - a suburb well south of the District - saw prices fall 61.1 percent. Highly elevated REO activity, with nearly 60 percent of homes sold as bank owned, helped push prices to a bottom in early 2009. Since that time REO conditions have consistently improved (i.e. declined) with increasingly fast pick-up of bank owned properties. This rise in demand has helped push prices up 30.2 percent from their deep lows, representing the largest price gain in the metropolitan area for the year.

Just east of the District and inside the beltway, Capitol Heights, MD (ZIP code 20743) has seen home prices consistently lag the greater metropolitan area. Peak prices were not seen in this area until the third quarter of 2007, more than a year after the metropolitan area. Similarly, while the higher-priced Woodbridge area was experiencing declining REO activity by early 2009, Capitol Heights was on an opposite path with steadily growing REO saturation rates. Price declines in Capitol Heights didn't turn positive in this investor and rental-driven area until the price run-up of last fall, leaving the area with a yearly decline of 41.4 percent. With only a few months of price gains, REO saturation still near 60 percent and a longer foreclosure process in Maryland compared to Virginia, this market is positioned to continue to lag any recovery of the greater metropolitan area.