Bucking trend, REOs show price gains: Clear Capital
National home prices lost ground with declines of 1% over the past year, but REO demand — fueled by enthusiastic investors — showed price gains, Clear Capital said in its April home data index report.
Investor demand could be a driving force behind increasing prices for REO properties, as measured on a median price per square foot, which is increasing at a much faster pace than non-REO sales.
Over the last year, REO-only prices have jumped a healthy 5.5%, while fair market sales prices dropped 2.9%.
The portion of national REO sales relative to total sales continued its creep in April, marking the third straight month of quarterly growth — without the typical price decline seen when REO saturation rises. Saturation was at 27.9% in April, up from 25.3% in December.
The sensitive balance between REO supply and demand will help determine how market prices react to shifts in REO saturation, Clear Capital said. If REO-to-rental investment activity increases, it likely will provide the lift needed to support price increases.
"Home prices continue to show relative strength in April with virtually no change over the short term and tapering losses over the longer term,” said Alex Villacorta, director of research and analytics at Clear Capital.
“Should investor interest continue to drive the expansion of REO-to-rental programs over the next several months, there could be a significant impact on the market overall in terms of providing a rising floor to home values,” he said.
Clear Capital's index looks at rolling quarters. The index compares the most recent four months to the previous three months.
The firm said quarter-over-quarter results were notable only in how little change was seen, with numbers very similar with the price changes reported last month.
The nation lost a little ground with quarterly losses of 0.2%, showing continuing price stability over previous month’s reports.
For the past five months, price movement at the regional level has settled in under 1% on a quarterly basis — with the exception of the Midwest.
The West, Northeast and South are all in positive territory, but significant losses in the Midwest pulled down national numbers. The Midwest lost 2.7% of its value over the quarter, the fifth month of declines.
The Phoenix market, hard hit in the housing meltdown, saw quarterly values increase 3.8 percentage points more than the next highest MSA. Phoenix topped the list of the highest performing 15 metros for the second month straight, and has been either leading or in second spot on this list since February.
Still, with the peak to current values still down by 58.2%, there is still a long way to see meaningful improvement.
The Milwaukee MSA is the hardest hit market this month with a dramatic quarterly loss of 12.5%.