Clear Capital Reports First Annual Gain in Home Prices Since 2006

With last month's numbers in and tallied, national home prices registered a 1.8 percent quarterly increase in January, and for the first time in 37 months, yielded a national year-over-year gain of 2.3 percent, ""Clear Capital"":http://www.clearcapital.com said Thursday.

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Dr. Alex Villacorta, senior statistician with Clear Capital, a California-based valuation firm, said, ""The stabilization in prices is significant in that it has occurred despite near record levels of unemployment and REO saturation.""

According to Clear Capital's latest ""Home Data Index (HDI) Market Report"":http://www.clearcapital.com/company/MarketReport.cfm?month=February&year=2010, all regions of the country saw positive quarterly returns, except for the Northeast, where prices dropped 1 percent for the three-month rolling quarter ending in January. In the Midwest, home prices climbed 5 percent. The South recorded an increase of 1.5 percent, and the West saw prices rise 1.3 percent.

Despite the Northeast's modest quarterly slowdown, Clear Capital said all regions improved their yearly numbers which contributed to the national annual gain. The Midwest continues to take the top spot in year-over-year returns, posting prices 11.0 percent higher than a year ago in January.

Severely distressed Detroit, Michigan led all markets once again, maintaining a 14.6 percent quarterly price change. Nine of the ""15 best performing major markets"":http://www.clearcapital.com/images/MarketReport/February2010/880_highPerformMrkt_0210.png saw quarterly prices improve over last month, and yearly price changes for all the highest performing markets improved by an average of 6.1 percent.

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Only the Florida markets of Jacksonville and Miami, and Riverside, California maintained yearly losses. However, Clear Capital said the recent improvement for all three markets has them headed toward positive territory for the yearâ€"possibly within a month's time. Clear Capital noted though, that if the two Florida markets continue to see their condominium segments deteriorate, in contrast with gains on single family properties, their overall home price recovery could be slowed down.

While all of the ""15 lowest performing markets"":http://www.clearcapital.com/images/MarketReport/February2010/880_lowPerformMrkt_0210.png in Clear Capital’s study â€" all except for Birmingham, Alabama â€" saw their quarterly prices degrade in January, the company says the list is far from bleak compared to recent years because year-over-year numbers continue to improve for nearly the entire list. Six markets on this list experienced positive yearly gains, and eight markets saw just single digit declines.

Based on Clear Capital’s analysis, the national REO saturation rate declined 0.7 percentage points to 24.8 percent in January. However, the company says an interesting trend has developed over the past few months in regions with the highest level of REO influence â€" recovery of home prices has been more notable where REO saturation is the highest. Clear Capital says this is apparent with the higher levels of REO saturation experienced in the West (35.4 percent) and Midwest (28.4 percent).

While the rise in prices within REO-saturated markets runs counter to traditional expectations (higher rates of REO saturation usually create downward price pressures), it's a reflection of the broad appetite for the steeply discounted REO segment. Clear Capital says increased REO activity in 2010 will be a true test of investor appetite for distressed sales.

“While it is a very positive sign that the overall national trends show yearly improvements in prices and REO saturation, market trend volatility and prices continue to vary considerably by micro market and price tier,"" said Villacorta. ""The sustainability of current price gains will be challenged in 2010, given that most lenders and analysts predict a significantly larger number of REOs will reach the markets.""