US residential property market sees steady rise in real estate prices in last three months
All regions of the US except for the Northeast saw residential property prices increase in the last three months, according to the latest published data.
Prices increased by 2.3% in January, marking the first year-over-year increase in more than three years, according to the Home Data Index from Clear Capital, the real estate data provider. In all, prices gained 1.8% on the rolling-quarterly scale into January.
The Northeast saw a 1% fall in prices while the biggest increase was in the Midwest, up 5%. The South had a 1.5% rise in prices and the West was up 1.3%.
Detroit led all Metropolitan Statistical Areas with a 14.6% quarterly gain in January. The jump follows a 14.1% increase in November 2009 and 17.4% rise in December.
But the price increases in Detroit come on the back of a steep decline. ‘Detroit always raises eyebrows. But we have to put it in perspective in terms of how far these prices have fallen. In Detroit, we’re talking a nearly 80% drop from the peak,’ explained Alex Villacorta, senior statistician at Clear Capital.
He added that what’s driving demand is the lower end of the housing market in Detroit. The first time homebuyer tax credit, a larger buying pool for consumers and an increase in investor presence stirs the activity in the lower-tier market in Detroit.
‘When you break it out by the top-price tier and lower-price tier, you do see a dichotomy starting to form. For instance, in Detroit, there is a 17% quarter-over-quarter change at the low end, where as in the high end, it’s closer to 4%,’ Villacorta said.
On the national side, Villacorta said that the year-over-year price gain is good to see despite near record high real estate owned (REO) saturation rates. That rate declined 0.7% to 24.8% in January, but, according to the report, regions with the highest level of REO have had steeper recoveries. The trend is most apparent with higher levels of REO saturation seen in the West, 35.4%, and the Midwest, 28.4%.
‘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. Further, this suggests that as the dynamics of supply and demand evolve, different markets will have varied responses to increased REO activity,’ Villacorta added.