Detroit’s Prices are 262.3% Below Peak

Nationally, prices in October expanded 11.7% over the last year, according to Clear Capital’s October Market Report, the first market report for the month, but national home price trends showed signs of moderation.

Rolling quarterly rates of growth indicate moderation is underway. National quarterly rates of growth have fallen from 3.8% to 2.1%. Low price tier homes (with values in the 25th percentile of all homes sold) have seen strong moderation from the last rolling quarter. Current rolling quarterly gains of 2.5% are less than half of the prior rolling quarter.

Of the top 50 major metro markets, the Detroit MSA turned out the strongest quarterly growth at 7.8% and second highest yearly gains of 31.6%. REO saturation fess 34.7 percentage points from the high of 64.6% in 2009. Detroit’s median price is $120,000, just over half the national median price of $210,000. Relatively small price gains will more heavily influence percentage gains in Detroit than in higher priced markets.

Deroit’s gains are tempered by a 29.9% REO saturation rate and a median price of $120,000, which is just over half the national median price of $210,000. While price gains are noteworthy, Detroit would need to see another 262.3% in growth to reach peak prices. In a market with severely depressed prices, a sustained recovery will depend on the strength of the local economy. Unemployment sits at more than 9.0% in Detroit, and median incomes are nearly half of national median incomes.

Other metro markets continue to exhibit variation in their growth drivers, yet share some similarities in overall trends:

• Of the 15 highest performing major metro markets, 11 have seen yearly gains top 20.0%.
• Lowest performing major metro markets remained relatively stable. Only one metro saw price declines over the last year at -1.1%, a relatively minor decline.

“While prices across the country saw another boost in October, gains are starting to taper over the last quarter, in what could be the tail end of the summer buying season,” said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital. “We continue to see trends in the low tier price sector support a likely moderation ahead. And as we’ve maintained, moderation defines a healthy recovery. While some markets currently have eye-popping growth rates reminiscent of the housing run-up, these trends are mainly short term corrections as markets fall back in line with their long run levels.

“While the speed at which some markets are returning to pre-bubble norms is noteworthy, recovery is relative. Detroit is a great example. While it has seen more than 30% growth over the year, the market would need to see another 262% growth to hit peak prices. Our graph shows how Detroit prices have fallen in line with its historical trends (pre-2006). Following 2006, prices fell nearly 77%, so what we’re seeing is a response to a severe price correction.”

Top metro prices:

Nationally, prices in October expanded 11.7% over the last year, according to Clear Capital’s October Market Report, the first market report for the month, but national home price trends showed signs of moderation.

Rolling quarterly rates of growth indicate moderation is underway. National quarterly rates of growth have fallen from 3.8% to 2.1%. Low price tier homes (with values in the 25th percentile of all homes sold) have seen strong moderation from the last rolling quarter. Current rolling quarterly gains of 2.5% are less than half of the prior rolling quarter.

Of the top 50 major metro markets, the Detroit MSA turned out the strongest quarterly growth at 7.8% and second highest yearly gains of 31.6%. REO saturation fess 34.7 percentage points from the high of 64.6% in 2009. Detroit’s median price is $120,000, just over half the national median price of $210,000. Relatively small price gains will more heavily influence percentage gains in Detroit than in higher priced markets.

Detroit’s gains are tempered by a 29.9% REO saturation rate and a median price of $120,000, which is just over half the national median price of $210,000. While price gains are noteworthy, Detroit would need to see another 262.3% in growth to reach peak prices. In a market with severely depressed prices, a sustained recovery will depend on the strength of the local economy. Unemployment sits at more than 9.0% in Detroit, and median incomes are nearly half of national median incomes.

Other metro markets continue to exhibit variation in their growth drivers, yet share some similarities in overall trends:

· Of the 15 highest performing major metro markets, 11 have seen yearly gains top 20.0%.

· Lowest performing major metro markets remained relatively stable. Only one metro saw price declines over the last year at -1.1%, a relatively minor decline.

“While prices across the country saw another boost in October, gains are starting to taper over the last quarter, in what could be the tail end of the summer buying season,“ said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital. “We continue to see trends in the low tier price sector support a likely moderation ahead. And as we’ve maintained, moderation defines a healthy recovery. While some markets currently have eye-popping growth rates reminiscent of the housing run-up, these trends are mainly short term corrections as markets fall back in line with their long run levels.

“While the speed at which some markets are returning to pre-bubble norms is noteworthy, recovery is relative. Detroit is a great example. While it has seen more than 30% growth over the year, the market would need to see another 262% growth to hit peak prices. Our graph shows how Detroit prices have fallen in line with its historical trends (pre-2006). Following 2006, prices fell nearly 77%, so what we’re seeing is a response to a severe price correction.”

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