Clear Capital: Home Prices Could Near 'Triple-Dip' by Next Spring
By: Carrie Bay
Clear Capital has released its forecast for home prices heading into the first part of next year. The company says the market is flirting with a “triple-dip” by next spring.
This last spring prices did a double-dip, dropping below this cycle’s previous low point. The seasonal homebuying season has brought with it a steady uptick in home prices as sales activity has gotten a bit of a boost.
But Clear Capital warns that with the next six months comes the market’s typical seasonal slowdown.
The company’s analysts are projecting U.S. home prices to drop 1.6 percent over the last three months of this year, and another 3.2 percent by next April.
This projected drop would move prices dangerously close to the levels seen at the end of the first quarter of 2011, their lowest since things started heading south with the onset of the housing crisis.
“The housing market has yet to demonstrate the fundamentals necessary to overcome a seasonal slowdown over the next six months, which drives our projected 3.2 percent drop in national home prices through the first quarter of 2012,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital.
Villacorta says the company’s September home price measures show continued slowing of the price gains seen earlier this year across the spring and summer months.
He says the normally positive market forces of record low mortgage rates and near record lows in home prices are being offset by high unemployment and general consumer pessimism.
Clear Capital’s latest home price index shows quarter-over-quarter home price gains nationally continue to soften, posting a 3.5 percent increase in Thursday’s report, versus growth of 4.0 percent reported last month.
“Although prices are still up, the tide appears to be turning and these gains are expected to halt as early as next month,” Clear Capital said.
The company says the resurgence in home price values over the last four months is best explained as the bounce-back from the double dip observed in the first quarter of this year.
“As market prices move farther away from that low point, quarterly price changes will reflect the slowdown in price growth and yearly home price changes will show the stagnant environment that the market is in presently,” Clear Capital explained.
The company’s latest assessment reveals year-over-year price changes remain negative, down 3.8 percent from September 2010.
Clear Capital says REO saturation, however, continues to improve across the country with only slightly more than one-quarter of homes – 25.3 percent – selling as distressed.
This rate is down from 34.5 percent in May and 40.9 percent at the peak in the first quarter of 2009.
“The current REO saturation rate is an encouraging sign that the summer buying season saw increased sales in the non-distressed segment, which helped support price growth,” according to Clear Capital.
If prices follow Clear Capital’s projected trajectory of falling 1.6 percent over the latter part of this year, the company says 2011 will have experienced a 1.0 percent decline for the calendar year and a 1.4 percent gain since the first dip in 2009.
Barring any new shocks to the market, the company says these modest price movements are anticipated to continue, with little reason to expect big gains or losses through the next couple of years.
According to Clear Capital, a dreaded “triple-dip” is likely only to be flirted with, assuming there is not a major shock to the system in upcoming months.
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