Home Prices Show First Annual Increase Since 2006

By:
Kara Johnson | February 04, 2010

U.S. home prices have posted their first 12-month gain since late 2006, according to figures released today by real estate data company Clear Capital.

National home prices in January were up 2.3 percent from their January 2009 level, according to Clear Capital’s Home Data Index, while posting their eighth consecutive month of rolling quarterly gains, with prices up 1.8 percent over the past three months. In the rolling quarter method, figures are updated each month to reflect activity over the previous three-month quarter.
 
"It's great to see the year-over-year positive gain in national home prices continue into 2010 the pricing stability we saw the last half of 2009," said Alex Villacorta, Clear Capital’s senior statistician.  "The stabilization in prices is significant in that it has occurred despite near record levels of unemployment and REO saturation."
 

Strong demand for foreclosed property

 
REO saturation refers to the percentage of total sales represented by real estate-owned, i.e. foreclosed, properties. In an unusual development that has emerged in recent months, the company reported that pricing recoveries have tended to be stronger in areas with higher REO saturation, in contrast to the usual pattern where foreclosures tend to hold prices down.
 
For example, prices in the Detroit market posted gains of 14.6 percent for the rolling quarter and 16.6 percent annually, despite an REO saturation level of 46.6 percent. In the Cleveland area, prices were up 6.9 percent for the quarter and a whopping 69.7 percent for the year, with an REO saturation rate of 31.6 percent.
 
The report attributed the counterintuitive gains to a strong appetite among purchasers for discounted REO properties. It noted that investor demand for distressed properties will likely be tested in 2010, as more REOs come onto the market.
 
The national saturation rate of REO (real estate owned, i.e., foreclosures) properties declined 0.7 percent in the Nov.-Jan. quarter compared to the previous month, to 24.8 percent of all properties sold.
 
Detroit’s 14.6 percent gain was the strongest quarterly price increase of all major markets, followed by Providence, R.I. at 7.6 percent and Cleveland and Oklahoma City, Okla. tied at 6.9 percent each. New Orleans posted the nation’s biggest quarterly price decline at 4.6 percent, followed by New Haven, Conn. and Boston at 4.4 percent and 3.2 percent, respectively.
 

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