SOURCE: Clear Capital

Clear Capital

September 02, 2014 08:00 ET

Clear Capital: The Lost Decade. Here To Stay?

U.S. Housing Memorializes 10 Years in "The Lost Decade"; Flat Prices in 2015 Suggest More Years to Come

TRUCKEE, CA--(Marketwired - September 02, 2014) - Clear Capital (www.ClearCapital.com), the premium provider of data and solutions for real estate asset valuation and collateral risk assessment, today released its Home Data Index™ (HDI) Market Report with data through August 2014. Using a broad array of public and proprietary data sources, the HDI Market Report publishes the most granular home data and analysis earlier than nearly any other index provider in the industry.

  • 2004-2014 a.k.a. the U.S. housing market's "lost decade" where national home prices have been nominally unchanged. We're back to 2004 levels without even accounting for inflation, leaving many homeowners with no more equity than when they bought. This is unusual in the history of the housing market where prices have risen 55% over each rolling 10 year period since 1985.
  • If national home price growth continues to diminish, the lost decade will drag out. August home price growth fell 0.4 percentage points from July to 8%, continuing the run of declining yearly gains over the last eight consecutive months.
  • The anomaly of the past 10 years has impacted prices and growth but also damaged homebuyer perception. Markets began to heal with investor activity in the distressed and low tier segments. However, disengagement from first-time and move-up buyers -- in part a result of low confidence -- continues to prolong stagnation. We expect continued moderation, with just 1.8% growth expected through our revised 2015 forecast. The lost decade is gearing up for another year. 
  • As we well know, behavior at the nation does not reflect a market-by-market view. The Midwest is looking at 15 years idle. While Midwest home prices are at 1999 levels, it is the only region expected to see more than 3% price growth between now and the end of 2015. Even if forecasts in the Midwest materialize, the market will only have climbed back to price levels seen in the year 2000.
  • Honolulu and Denver both escaped a lost decade, with home prices in both markets at historical highs. Prices in Denver are now 10.6% above 2004 levels, a result of slow and steady gains during the bubble years and a stronger local economy withstanding the forces of the bubble bursting. In general, markets that saw slow and steady gains during the run up have been better poised to withstand the effects of the meltdown. While Honolulu home prices rose rapidly during the bubble, they are still an astounding 70.3% higher than 2004 levels bringing them 14.3% higher than peak levels -- a natural result of limited supply in a destination location with high demand. These markets should remind homebuyers that there are always exceptions and local trend insight matters.
  • Contact Alanna Harter for your August 2014 file of the Top 30 MSAs or access our data on the Bloomberg Professional service by typing CLCA <GO>.

"Two and a half years of recovery hasn't been enough to bring a close to U.S. housing's 'lost decade,'" said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital. "With our revised forecast showing only 1.8% growth through 2015, our lost decade, like Japan's, could extend more than 10 years. Though national home price growth since 2012 of 23.5% has outpaced historical annual averages of 3.5%, home prices are still at 2004 levels -- a clear indictment of the housing market's weakness only a few short years ago.

Fewer discounted distressed deals limiting investor demand and hesitation from non-investor and move-up homebuyers could drag out the lost decade. For now, national yearly home price growth of 8% is still double historical averages. As we brace ourselves for price moderation for the immediate future, the risk of price volatility could damage homebuyer perception, preventing markets from seeing the stable growth of Denver and Honolulu. In addition to the obvious drivers of job and wage growth, we need slow and steady price growth to help support the perception of a healthy housing market among homebuyers. The market must find equal footing before we're well into a second lost decade."

About the Clear Capital® Home Data Index™ (HDI) Market Report

The Clear Capital HDI Market Report provides insights into market trends and other leading indices for the real estate market at the national and local levels. A critical difference in the value of the HDI Market Report is the capability of Clear Capital to provide more timely and granular reporting than nearly any other home price index provider.

The Clear Capital HDI Market Report

  • Offers the real estate industry (investors, lenders, and servicers), government agencies, and the public insight into the most recent pricing conditions, not only at the national and metropolitan level, but within local markets as well.
  • Is built on the most recent information available from recorder/assessor offices, and then further enhanced by adding the company's proprietary streaming market data for the most comprehensive geographic coverage and local insights available.
  • Reflects nationwide coverage of sales transactions and aggregates this comprehensive dataset at ten different geographic levels, including hundreds of metropolitan statistical areas (MSAs) and sub-ZIP code boundaries.
  • Includes equally-weighted distressed bank owned sales (REOs and short sales) from around the country to give the most real world look of pricing dynamics across all sales types.
  • Allows for the most current market data by providing more frequent updates with patent pending rolling quarter technology. This ensures decisions are based on the most up-to-date information available.

The Clear Capital HDI Methodology

  • Generates the timeliest indices in patent pending rolling quarter intervals that compare the most recent four months to the previous three months. The rolling quarters have no fixed start date and can be used to generate indices as data flows in, significantly reducing the multi-month lag time experienced with other indices.
  • Includes both fair market and institutional (real estate owned) transactions, giving equal weight to all market transactions and identifying price tiers at a market specific level. By giving equal weight to all transactions, the HDI is truly representative of each unique market.
  • Results from an address-level cascade create an index with the most granular, statistically significant market area available.
  • Provides weighted repeat sales and price-per-square-foot index models that use multiple sale types, including single-family homes, multi-family homes, and condominiums.

About Clear Capital®

Clear Capital (www.ClearCapital.com) is the premium provider of data and solutions for the mortgage finance industry. The Company's products include appraisals, broker price opinions, property condition inspections, value reconciliations, automated valuation models, quality assurance services, and home data indices. Clear Capital's combination of progressive technology, high caliber in-house staff, and a well-trained network of more than 40,000 field experts sets a new standard for accurate, up-to-date, and well documented valuation data and assessments. The Company's customers include the largest U.S. banks, investment firms, and other financial organizations. Clear Capital's home price data can be accessed on the Bloomberg Professional service by typing CLCA <GO>.

The information contained in this report is based on sources that are deemed to be reliable; however no representation or warranty is made as to the accuracy, completeness, or fitness for any particular purpose of any information contained herein. This report is not intended as investment advice, and should not be viewed as any guarantee of value, condition, or other attribute.

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