Friday, June 10, 2011

Excluding Distressed Home Sales, CoreLogic Index Shows That Home Prices Are Increasing in 20 States



The company CoreLogic calculates and reports a monthly home price index (HPI), similar to the Case-Shiller Home Price index, and is being featured on CD for the first time today.  The CoreLogic HPI is a "repeat-sales index that tracks increases and decreases in sales prices for the same homes over time, which provides a more accurate "constant-quality" view of pricing trends than basing analysis on all homes."  CoreLogic's HPI covers median home sales prices in 6,500 U.S. zip code areas and 1,119 counties in all 50 states.  

Two key differences between the Case-Shiller and CoreLogic home price indexes are: a) CoreLogic releases home price data a month earlier (now available for April) than Case-Shiller (now available for March), and b) CoreLogic reports two price indexes - one that includes all single-family homes (like Case-Shiller) and another home price index that excludes distressed sales (short sales and REO transactions).  In that way, we can track home prices in the "healthy" sector of the real estate market independently of the distressed part of the market.

In its June 1 release (available here with registration), CoreLogic reported that its April HPI increased on a monthly basis by 0.7% compared to March, the first monthly increase in home prices since the home-buyer tax credit expired in mid-2010.  On an annual basis, home prices declined by 7.5% in April.  Excluding distressed sales, the HPI increased by 1.78% on a monthly basis in April, and declined by only 0.45% on an annual basis. 

Mark Flemming, chief economist of CoreLogic commented that "the first month-over-month increase in the HPI since government support for home buying was removed provides reason for cautious optimism" about the U.S. housing market.  

The maps above from the CoreLogic June report show an interesting pattern: the top map displays the annual change in the HPI for all homes, and shows that only six U.S. states have positive 12-month rates of appreciation through April (white states).  Excluding distressed sales, the bottom map shows that there are 20 states that have positive rates of appreciation through April, led by W. Virginia (8.4%), S. Carolina (6.1%), Hawaii (5.8%), Mississippi (5%) and N. Dakota (4.5%).     

Bottom Line: Distressed home sales are dragging down overall home prices and mask the fact that home prices in the "non-distressed" sector of the market are actually starting to show some healthy, positive appreciation. 

7 Comments:

At 6/10/2011 10:27 AM, Blogger Dr William J McKibbin said...

"All's well General -- excluding the people who were killed or wounded, everyone else survived the battle..."

 
At 6/10/2011 11:04 AM, Blogger morganovich said...

distressed sales were 28% of the market in q1.

they are selling at an average discount of 27% to non distressed.

this leads to an interesting question:

why would non distressed prices be rising when distressed properties are so much cheaper and still so plentiful?

is there some difference in quality level? probably. homes priced at $1mn+ with superjumbo loans are less likely to be distressed sales as they never had the liar loan options that stuff under $417k had.

i suspect that this really just reflects the fact that the upper end of RE is doing better than the lower.

here in park city, prices are starting to rise and inventory is dropping. the same has been true in san francisco (proper, not the county they use for bogus RE stats). both are places where pretty much any 80-90% financing is a superjumbo.

but in a place like reno, i would bet that a $300k home that is not distressed sells at similar pricing to one that is. desperate sellers affect a whole market.

 
At 6/10/2011 11:11 AM, Blogger juandos said...

notes: "distressed sales were 28% of the market in q1"...

Interestingly HousingWire has some thing quite similer: Foreclosures approach 25% of the housing market: Zillow

You also might find this New York Times interactive graph (using Case-Schiller data) worth a look: Housing’s Rise and Fall in 20 Cities

Published: May 31, 2011

 
At 6/10/2011 11:14 AM, Blogger VangelV said...

"All's well General -- excluding the people who were killed or wounded, everyone else survived the battle..."

You beat me to it.

 
At 6/10/2011 12:10 PM, Blogger LakeDweller said...

I'm glad everyone picked up on the irony of excluding distressed sales!
Reno is a great market to look at trending $/sqft values. Although prices have stabilized, the $/sqft continues to drop.
This definitely proves distressed home sales impact the market.

 
At 6/10/2011 1:05 PM, Blogger Jason said...

Dr. McKibbin wins the prize!

But seriously, how could you exclude distressed housing sales?

 
At 6/10/2011 4:01 PM, Blogger PeakTrader said...

That's like saying with the unemployment rate between 9% and 22%, 78% to 91% of the labor force is at least doing OK.

 

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