Home Prices Down in 2011, but Market Stability Forecast for 2012
By: Carrie Bay
While year-over-year home price measurements notched down in 2011, prices are expected to see a slight uptick in 2012, according to Clear Capital.
Should the valuation company’s predictions ring true, it would be the first time since 2006 that the change in annual home prices has landed in positive territory.
Data released by Clear Capital Monday shows year-over-year, national home prices were down 2.1 percent in 2011. The company says movement in home prices began to stabilize somewhat during the latter half of the year and REO sales as a percentage of total home sales began to decline, which helped to moderate depreciation for the year overall.
In 2012, Clear Capital is forecasting U.S. home prices to show continued stabilization with a slight gain of 0.2 percent across all markets. That would put national home prices near levels not seen since 2001.
“Overall, 2011 was a relatively quiet year for U.S. home prices compared to the last five years,” said Dr. Alex Villacorta, director of research and analytics at Clear Capital. “With national prices down a little more than two percent for the year and sitting at their lowest point since 2001, our projections show that the current balance the market has found will continue through 2012.”
According to Clear Capital, the importance of micro-market analysis becomes plainly apparent as the 2012 forecast is for a flat U.S. market, but only 40 percent of individual markets (20 of 50) are projected to be stable.
Individual markets reacting to their local economic drivers will exhibit a wide range of performance levels, Dr. Villacorta explained.
When looking at distinct metro market areas, it turns out only 24 percent showed signs of stabilization in 2011, while the others are still moving more dramatically higher or lower, Villacorta explained.
“What’s most interesting is that the lower segments of appreciating markets are driving much of the current price growth,” Villacorta said. “In places like Florida, which have historically been hard hit, we are now seeing
considerable activity in lower-end properties as demand continues to heat up.”
Clear Capital’s report shows U.S. prices declined 0.4 percent in December on a quarter-over-quarter basis as markets gave back some of the gains of the summer buying season.
December’s quarterly assessment is the first cooling off after six monthly reports from Clear Capital showed minimal quarterly gains. In fact, the company says the most recent six months of the year saw national home prices flat, posting a decline of just 0.1 percent over the second half of 2011.
The 2.1 percent price decline over 2011 marked the smallest year-end change in either direction since the market gained 1.7 percent in 2006, according to Clear Capital.
Regional trends revealed a bit more price variability. The Northeast’s meager 0.1 percent yearly gain led the nation, comparing favorably to declines of 1.3 percent, 3.0 percent, and 4.4 percent turned in by the South, Midwest, and West, respectively.
While changes in prices across the U.S. were mild for 2011, there were notable extremes at the positive and negative sides of the market, Clear Capital says.
Four metros posted price declines greater than 10 percent. Atlanta, Georgia, led the way with 18.3 percent shaved off its home values in 2011, followed by Seattle, Washington, which posted a 15.1 percent annual decline. Birmingham, Alabama, and Detroit, Michigan, also rode the markets down with 11.1 percent and 10.8 percent price drops, respectively.
On the positive side, Dayton, Ohio, enjoyed 11.5 percent annual price growth in 2011. The next two strongest performers came from Florida, with Orlando and Miami laying claim to 6.7 percent and 5.6 percent price gains, respectively.
Each of the markets with double digit declines saw an increase in the percentage of sales that were REOs, while declines in REO saturation helped buoy the top performing markets to positive price growth in 2011.
Nationally, Clear Capital says REO saturation reached a new yearly low at the end of 2011 at 24.8 percent.
Clear Capital expects 2012 to play out much like the last half of 2011, with only a very subtle price change at the national level. A minimal decline in the beginning of the year is expected to turn into a meager gain by year’s end, the company explained.
At a more granular level, half of the 50 major metro markets included in Clear Capital’s study are expected to post gains for the year, with individual metros experiencing the full gamut of price movement, from double-digit growth to double-digit drops.
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