Despite enduring notably higher levels of foreclosures in February, three out of the nation's four regions shrugged off the uptick in foreclosures and achieved higher prices.
Clear Capital today reported that although February national home prices went down 1.9 percent year-over-year, the loss represented the lowest level of decline in over 10 months.
The national short term numbers were also better than recent months with a loss of only -0.6 percent quarter-over-quarter, very close to the sixth month performance, and highlighting the short term stability we've seen over last four months.
At the regional level, short term numbers were all slightly negative, with the largest hit being in the Midwest with a -1.8 percent drop in values. This region is still fighting hard against broader issues such as higher unemployment and REO saturation than the rest of the nation, and the winter season slow down that tends to hit the Midwest relatively hard. The West posted a relatively high level of year-over-year price depreciation, but showed a higher degree of stability in quarterly numbers, which is a positive sign for the region which has struggled over the last year. The Northeast continues to show relative strength.
Three out of four regions saw increasing levels of REO saturation but fought hard against the usual and often dramatic downward pressure on prices it brings. In fact, the regions saw higher REO saturation, the seasonal effects of winter, and an unsettled political environment (election year) but resisted these negatives effects surprisingly well. Price stability in this environment indicates the presence of positive forces, which could be the improving unemployment numbers, an increase in investor activity, and an increase in overall demand.
Each metro on the list held onto quarterly gains, but with just six of the Top 15 showing price growth of greater than 2 percent. However, the quarterly gains for this group averaged 2.4 percent against the 1.5 percent average quarterly gain posted for the Top 15 group last month.
Clear Capital Chief Economist Alex Villacorta said in an interview that the markets' abnilit to sustain gains in light of the increase in REO saturation shows market strength, which is a good omen for the coming influx of foreclosures in the wake of the multi-state AG settlement.
The group had an average REO saturation level at 27.3 percent, which is 1.5 percentage points above the national level of 25.8 percent. While Las Vegas made its way into the Top 15 performing markets with a small quarterly gain of 0.8 percent against an annual loss totaling 6.7 percent, there are indications this market is not yet heading in the right direction.
Underlying the small growth for this month are substantial declines in the low tier segment of that market, or those homes selling for $65,000 or less. This goes squarely against the trend seen in other hard hit areas such as Orlando, Miami, and Phoenix where prices are going up in the lower price tiers as investors are paying cash to take advantage of the rental markets, Villacorta said.
Villacorta said he doesn't expect the backlog of properties in the foreclosure pipeline to come on market in the next 12 months, especially in judicial states, where the backlogs are the greatest. "Releasing REOs in a flood creates diminishing returns for lenders and at some point, that becomes a worse option," he said.