2011 forecasts from Clear Capital

Clear Capital has released its monthly Home Data Index™ (HDI) Market Report, reporting a year-over-year national price change in 2010 of -4.1 percent, and expects another -3.7 percent year-over-year change in 2011 (See the press release below.)

In its report, Clear Capital forecasts the change in home prices for 2011 in 50 major U.S. metro areas.  Although Reno/Sparks is not one of the markets forecasted, Las Vegas/Paradise, NV is.  Home prices or forecasted to decline 6.4 percent in 2011 for Las Vegas/Paradise.

The report features some nice charts and interesting graphs. (Again see the press release below).  For example, this graph depicts the turmoil of U.S. home prices through 2010.  Almost looks like a double dip.

Market Report
reprinted by permission

Clear Capital™ Recaps Record Setting Volatility of 2010: U.S. Home Prices Down; Forecasts Additional Drop in 2011

Local market knowledge critical as unemployment, REO saturation rates drive divergence in individual market trends

TRUCKEE, CA – Jan. 6, 2011 – Clear Capital (www.clearcapital.com) released its monthly Home Data Index™ (HDI) Market Report, reporting a year-over-year national price change in 2010 of -4.1 percent, and expects another -3.7 percent year-over-year change in 2011. The HDI Market Report provides the most current (through December 2010) and granular analysis of how local markets performed compared to the national trend in home prices, as well as a 12-month forecast of what to expect in 2011.

“In terms of home prices, this past year has certainly been characterized by uncertainty,” said Dr. Alex Villacorta, senior statistician, Clear Capital. “Tax incentives and high levels of distressed sale activity had counter effects on home prices which contributed to the fragility of the markets.”

“Some housing markets are well on their way to recovery, while others are experiencing a renewed downturn reminiscent of the housing crash only two years ago,” added Dr. Villacorta. “Understanding which path a given market is likely to follow is dependent on several key factors, but the two clear drivers are local unemployment rates and the prevalence of distressed homes.”

Clear Capital Home Data Index: National Home Price Trends
(Jan. 2006 – Dec. 2011 Forecast)

National home prices in 2010 posted a -4.1 percent year-over-year price change, after a very turbulent year where prices increased 9.7 percent over a 21 week span (late March to mid August), only to be followed by a -9.4 percent price change over the following 19 weeks (September to December).

 

One-Year Metro Market Forecast

 

Metro Markets (2011 Forecast, 2010 Observed)

Home Prices Decline in 70% of Major Markets in 2010

2010 marked another year of price declines across much of the U.S. as prices faced significant downward pressure with the national unemployment rate staying above 9.5 percent and REO saturation holding above 22 percent throughout the year.

• Rapid and severe declines subsiding, as only eight major markets experienced double digit price declines in 2010.
• Six of the 15 major markets that managed price gains were in California (Riverside, San Diego, Los Angeles, San Jose, San Francisco, and Fresno).
• Year characterized by record volatility, with quarterly prices changes of -4.3% (Q1), +5.8% (Q2), -1.6% (Q3), -3.9% (Q4) through the last four rolling quarters.

In 2010, uncharacteristic volatility occurred in home prices within relatively short time intervals. Of the top 50 major markets, 38 saw price swings of more than six percent at some point last year, driven in large part by the extension of the federal home buyer tax credit. Conversely, from the middle of 2002 through mid 2009 national prices only changed direction once and at no point were there quarterly price swings from negative to positive gains of more than one percent in consecutive quarters. At the beginning of 2010, however, national prices saw a 10.1 percent price swing from price declines to price growth. As the effects of the tax credit wore off, national prices reversed this pattern during the latter half of 2010, posting a 7.4 percent price swing into negative territory for consecutive quarters.

California markets typically showed a faster rebound than other hard hit states as six of the 15 markets managed price gains (Riverside, San Diego, Los Angeles, San Jose, San Francisco, and Fresno). The only major California market to decline was Sacramento (-1.4 percent price change).

Despite renewed downward pressure during the latter half of 2010, only eight markets experienced double digit negative price changes (Dayton, OH; Columbus, OH; Milwaukee, WI; Tucson, AZ; New Haven, CT; Jacksonville, FL; Virginia Beach, VA; and Richmond, VA); a noticeable improvement to the 12 markets that experienced double digit declines in 2009.

In 2011, Turbulent Markets Show Signs of Stabilization, With Notable Exceptions

• Highest performers: Washington, D.C; Houston, TX; Honolulu, HI; Memphis, TN; and Columbus, OH.
• Lowest performers (all double digit declines): Virginia Beach, VA; New Haven, CT; Tucson, AZ; Dayton, OH; and Jacksonville, FL.
• The top 50 major markets should continue to shed the artificial effects of 2010’s tax credit and return to a non-incentivized market environment, leading to more consistent price trends. In 2011, these major metros are expected to have a forecast average price change of -3.6%.

2011 should be more consistent, price-wise, both for the better and worse. Typically, markets with both high unemployment and high REO saturation are troubled and will experience large declines. Areas with either one or the other, high unemployment or REO saturation, may be able to stave off big declines if not too severe, but either one can still be enough to drive prices down.

Even though many major markets are forecasted to be down again in 2011, definite signs of overall stabilization are evident. Nationally, nearly half of the yearly declines are expected in the first quarter of the year, leaving unchanged price growth during the middle of the year, and renewed declines in the last quarter of the year. Of the 50 major markets listed above, 14 of them are expected to sustain gains in the latter half of 2011.

The Unemployment Factor

Markets in the West region will struggle to post gains this year, and some, notably in Arizona, may see double digit declines. California markets that posted positive gains in 2010 are unlikely to do so this year, with the San Francisco MSA region (which includes troubled Contra Costa County), to experience the biggest declines. The San Francisco-area MSA is forecasted to experience a -9.3 percent price change for 2011. While this forecasted price decline paints an ominous picture for the Bay Area, the majority of the declines will be centered in Contra Costa County. With the U.S. Bureau of Labor Statistics reporting unemployment rates for Alameda County and Contra Costa County over 10 percent (well above the 9.3% of San Francisco County), downward price trends are expected for the year. As an example of the disparity within the San Francisco MSA, prices in Contra Costa County are expected to change -11.1 percent by the end of 2011, while San Francisco County prices are forecasted to post a marginal change of -1.3 percent by the end of the year. Adding further pressure to prices in the Alameda and Contra Costa Counties are the REO saturation rates which are presently nearly double and triple that of San Francisco’s REO saturation rate, respectively. Despite these expected declines, a -9.3 percent price change for the MSA in 2011 would still be 7.4 percent above the record lows of early 2009.

The REO Saturation Factor

Arizona markets are forecasted to continue downward in 2011 as well, with Phoenix and Tucson expecting large declines (-9.4 and -11.9% respectively). While unemployment rates in major Arizona cities are less than the national rate, REO saturation, or the proportion of all homes sold as a bank-owned, is more than 12 percentage points above the national level for Tucson and more than 19 percentage points for Phoenix. As more distressed inventory is released into the markets, the supply of discounted properties will bring considerable downward price pressure for the foreseeable future.

Lower-priced homes and high levels of distressed activity combined with a post-tax credit environment in 2010 to help make Ohio’s markets great examples of market volatility. With Ohio market volatility forecasted to moderate, Columbus is expected to shake off its -17.0 percent yearly price change in 2010, and return a 2.1 percent change this year. Similarly, Dayton is forecasted to cut in half the 22.3 percent loss it experienced in 2010.

The South region is forecast to have a rough go of it, too, with four of the ten worst declining markets taking place in that region. Virginia Beach, VA is forecasted to post the biggest year-over-year negative price change (-12.8%).

Strong Market Contenders

Major cities in the western Gulf states, and Washington, D.C. are least likely to see high dollar declines in home values. Washington, D.C. follows-up its strong performance in 2010 with an expected 6.5 percent year-over-year price change in 2011. The District will be an interesting market to watch this year, though, because while it’s unlikely employment will fall, these numbers have been tempered with the added uncertainty due to the freezing of federal salaries, effective Jan. 1, 2011.

A 7.9 percent state unemployment rate bodes well for major markets in Texas, with home prices forecasted to gain 3.6 percent in Houston and 1.4 percent in Dallas. These projections place Houston and Dallas as the second and sixth highest performing markets of 2011, respectively.

About the Clear Capital Home Data Index (HDI) Market Report

The Clear Capital HDI Market Report has displayed consistent market trends as other leading indices (peak, trough, secondary trough and tax credit run- ups). Despite these consistencies, a critical difference is that HDI’s methodology enables more timely and granular reporting. Clear Capital’s ability to report today the significant drop in home prices, as well as the growing list of double dip markets, paints an ominous picture that will likely show up in other home data indices in the months to come.

The Clear Capital HDI Market Report:

• Offers the real estate industry (investors, lenders and servicers), government agencies and the public insight into the most recent pricing conditions, not only at the national and metropolitan level, but within local markets as well.
• Patent pending rolling quarter technology significantly reduces the multi-month lag time associated with other indices to help investors, loan servicers and individual buyers and sellers make more informed, timely and profitable decisions.
• Data is built on the most recent data available from recorder/assessor offices, and then further enhanced by adding the Company’s proprietary market data for the most comprehensive geographic coverage and local insights available.

Clear Capital Home Data Index™ Methodology

• Generates the most timely indices in patent pending rolling quarter intervals that compare the most recent four months to the previous three months. The rolling quarters have no fixed start date and can be used to generate indices as data flows in, significantly reducing the multi-month lag time experienced with other indices.
• Includes both fair market and institutional (real estate owned) transactions, giving equal weight to all market transactions and identifying price tiers at a market specific level. By giving equal weight to all transactions the HDI is truly representative of each unique market.
• An address-level cascade results in an index with the most granular, statistically significant market area available.
• Provides weighted repeat sales, and price-per-square-foot index models that use multiple sale types, including single-family homes, multi-family homes and condominiums.

About Clear Capital

Clear Capital (www.clearcapital.com) is a premium provider of data and solutions for real estate asset valuation and risk assessment for large financial services companies. Our products include appraisals, broker-price opinions, property condition inspections, value reconciliations, and home data indices. Clear Capital’s combination of progressive technology, high caliber in-house staff and a well-trained network of more than 40,000 field experts sets a new standard for accurate, up-to-date and well documented valuation data and assessments. The Company’s customers include 75 percent of the largest U.S. banks, investment firms and other financial organizations.

 

Legend

Address Level Cascade – Provides the most granular market data available. From the subject property, progressively steps out from the smallest market to larger markets until data density and statistical confidence are sufficient to return a market trend.

Home Data Index (HDI) – Major intelligence offering that provides contextual data augmenting other, human-based valuation tools. Clear Capital’s multi-model approach combines address-level accuracy with the most current proprietary home pricing data available.

Metropolitan Statistical Area (MSA) – Geographic entities defined by the U.S. Office of Management and Budget (OMB) for use by Federal statistical agencies in collecting, tabulating, and publishing Federal statistics.

Repeat Sales Model – Weighted linear model based on repeat sales of same property over time.

Price Per Square Foot (PPSF) Model – Median price movement of sale prices divided by square footage over a period of time—most commonly a quarter.

Real Estate Owned (REO) Saturation – Calculates the percentage of REOs sold as compared to all properties sold in the last rolling quarter.

Rolling Quarters – Patent pending rolling quarters compare the most recent four months to the previous three months.

The information contained in this report is based on sources that are deemed to be reliable; however no representation or warranty is made as to the accuracy, completeness, or fitness for any particular purpose of any information contained herein. This report is not intended as investment advice, and should not be viewed as any guarantee of value, condition, or other attribute.

 

Media Contact:
Michelle Sabolich
Atomic PR for Clear Capital
(415) 593-1400
michelle.sabolich@atomicpr.com