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Prices Are Up, but Credit Must Be Addressed for Full Recovery

Even though President Obama and Governor Romney were criticized for ""evading housing issues"":http://dsnews.comarticles/special-series-re-maxs-dave-liniger-makes-house-calling-out-2012-10-31 when running for president, ""Clear Capital"":http://www.clearcapital.com/ asserts the ""sprint"" in housing still spoke positively for Obama and assisted him in his recent re-election.

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But, now that Obama has won a second term, his administration is charged with leading phase two of the housing recovery, and this will happen by collaborating with the industry to reduce regulatory uncertainty, according to a report from Clear Capital.

""President Obama's housing policies must evolve to turn the recovery's sprint into a marathon,"" said Dr. Alex Villacorta, director of research and analytics at Clear Capital. ""With a re-election secured, President Obama has the opportunity to stimulate lending activity by being bolder on policy. National gains of 4.6% over the year were enough to grab the attention of voters, and rightfully so.""

Prices were not only up 4.6 percent annually in October, according to the data provider, but REO saturation in October shrunk to 18.1 percent and has fallen 23 percentage points since the 2009 peak. REO saturation is the portion of REO sales relative to total sales

However, Clear Capital pointed to a somber reality: prices are 37.6 percent below the peak. This means a home bought for $200,000 in 2006 would be worth somewhere in the range of $124,800 today, Clear Capital explained.

Nonetheless, rising prices gave hope of a continuing recovery for voters who re-elected Obama, and the administration is armed with programs to assist struggling homeowners.

Although the Home Affordable Modification Program (HAMP) hasn't reached as many at-risk homeowners as projected (3 to 4 million), more than one million borrowers have found mortgage relief through the administration's program. In addition, the Home Affordable Refinance Program (HARP) has refinanced more than 1.6 million homeowners since its 2009 inception.

Still, a great challenge ahead for the administration will be to address the credit issue, and with that is the task of defining what constitutes as a Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM).

The Consumer Financial Protection Bureau (CFPB) plans to issue final rules on the Dodd-Frank provisions by January 2013.

""If regulations are clarified in a reasonable way, credit will thaw. This will support phase two of the housing recovery, as more of the middle class can qualify for home loans,"" the report stated.

In the meantime, prices showed gains all around in all four regions. The West led with the biggest yearly gain, 11.4 percent, followed by the South (+4.2 percent), Northeast (+2 percent), and Midwest (+1.1 percent). Quarter-over-quarter, the West also saw the biggest gain, with prices up 3.7 percent. The region has made major strides, but Clear Capital says its still 42.9 percent below its peak.

On a quarterly basis, Atlanta was ahead of other major metros as prices gained 8 percent. Atlanta's REO saturation, however, was a high 37.8 percent, but has dropped 9.7 percentage points in the last six months. Year-over-year, Phoenix posted a strong home price increase of 29.5 percent.

About Author: Esther Cho

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