and risk analytics firm Andrew Davidson & Co.
are separating the wheat from the chaff when assessing home values in markets saturated with distressed property sales.
Using Radar Logic's home price data, Andrew Davidson will create an index of non-distressed home sales prices to prevent property values in individual markets from being skewed too far into the negative due to an influx of discounted real-estate owned properties.
The index will essentially allow the data firms to separate distressed and non-distressed home prices to give buyers and sellers a better gauge of where borrower-owned home sales are in terms of overall value. For the record, the index is not the first of its kind. Analytics firm, CoreLogic (CLGS)
, for example, puts out a similar breakdown of home prices.
Radar Logic said it has always included all home sales data into one report, but found that with distressed sales making up 40% of sales in certain markets, it's time to create reports that account for differences in home price points.
"Home price and mortgage models that do not account for this dynamic are at risk of being skewed by the bifurcation of markets," Radar Logic said. "As homes sold in distressed sales command significantly lower prices than homes sold in non-distressed sales, models that blend distressed and non-distressed data underestimate real-estate deploying prices for properties sold by owner-occupants."
Radar Logic is trying to be the voice of reason as the market thumps along without a true bottom. Last month, the firm said homebuyers should not be fooled
by reports showing pending home sales up 8.2% between April and May.
Radar Logic essentially picked the pending home sales
report apart, saying 8.2% month-over-month sales growth does not equate to a recovery when sales are down 20.4% from last year. Instead, Radar Logic concluded that May's pending home sales remained "essentially flat."
Write to Kerri Panchuk