National home prices in January rose 5.4 percent over the prior year, a continuation of 2012’s positive trajectory, according to Clear Capital’s Home Data Index. The main driving force in markets across the U.S. continued to be the lower tier price segment, those homes selling for $102,000 and less, of which many are REO sales. While the national REO saturation rate in January held at 18.4 percent, well off the peak of 41.0 percent in March 2009, REO properties remain attractive to investors and homebuyers alike. REO sales continue to make an impact on the overall health and recovery of the housing market. The HDI’s equal weighting of REOs alongside fair market transactions provides the most accurate picture of the current state of the housing market.
The West recorded the highest yearly growth of all the regions, at 12.9 percent. As the market adjusts to a higher price floor and declining REO saturation, its likely future price trends will moderate. REO saturation in the West in now at just 17.2 percent, drastically improved from the peak of 52.5 percent in March 2009. The correlation between price trends and REO saturation continues to be a key indicator of market performance.
The South also continued to make progress, with yearly gains of 4.5 percent in January. The recovery in the South has a long way to go before total losses of 33.1 percent are recouped. January home prices in the Northeast rose 2.4 percent over the last year. While this rate of growth is the lowest out of all the regions, it’s an impressive jump over December’s yearly rate of growth of 1.5 percent.
Yearly price gains of 2.7 percent in the Midwest retreated slightly when compared to last month’s 3.0 percent rate of growth. Similar to quarterly trends, some large markets in the Midwest, like Chicago, haven’t fueled yearly growth. Meanwhile Detroit, with yearly gains of 7.1 percent, aided the region’s yearly gains overall.
As a group, the top 15 major metro markets in January continued to report similar trends to those seen in months past. Each of the top 15 metros reported quarterly gains, all under 5.0 percent. On average, the top 15 major metros saw yearly gains of 13.4 percent, notably higher than 5.4 percent, the national rate of yearly growth. The group’s average yearly gains are much more in line with the West’s yearly rate of growth of 12.9 percent, which is to be expected given that 11 out of the top 15 MSAs are from the West.
Most notably in January, Clear Capital’s top 15 major metro list did not include any Florida markets. September 2011 was the last time a Florida metro didn’t make the list. While it’s too early to speculate a stall in Florida’s recovery, January’s performance could be an indication of more moderate growth for a handful of the metros that led the national recovery in late 2011.
“Home price trends in January remained solid overall, considering we are in the middle of the toughest time of year for real estate,” said Dr. Alex Villacorta, Director of Research and Analytics at Clear Capital. “We saw quarterly trends continue to soften, while yearly gains strengthened, suggesting the budding recovery is not immune to the slower winter season. What remains to be seen is if home prices will continue to rise, or remain stable through the winter. Regardless of what trends play out in the near term, we expect home prices to continue on a positive trajectory long term.
“On a more micro level, Florida metros, namely Miami, Orlando, Tampa, and Jacksonville, were all missing from the top 15 performing market list. Since September 2011, at least one of these markets made the list. While this isn’t confirmation that the recovery is finished in the sunshine state, it’s certainly something to keep an eye on. These markets led the recovery in late 2011, and share some of the hallmarks for recovering markets overall. But so far, each of these metros remains in positive territory, and it looks like the state is simply experiencing what is par for the course, fewer buyers in the typically slow winter season.”