DRAFT_ClearCapital_HDIMarketReport_2010YIR_2011Forecast.pdf

Two factors, unemployment and prevalence of distressed sales, will determine the fates of local real estate market prices in 2011, according to the latest forecast from Clear Capital.

Nationally prices will fall 3.7 percent in 2011 after falling 4.1 percent in 2010, the economic consulting firm reported today. But individual markets will vary widely.

“Some housing markets are well on the way to recovery, while others are experiencing a renewed downturn reminiscent of the housing crash only two years ago,” said Dr. Alex Villacorta, senior statistician at Clear Capital. “Understanding which path a given market is likely to follow is dependent on several key factors, but the two clear drivers are local unemployment rates and the prevalence of distressed homes.”

Clear Capital’s local 2011 price forecasts range from +6.5 percent in the Washington, DC market to -12.8 percent in Virginia Beach, VA. Other top performers will be Honolulu, HI; Houston, TX; Memphis, TN and Columbus, OH. Markets expected to lose the most value, in addition to Virginia Beach, include New Haven, CT; Tucson, AZ; Dayton, OH; and Jacksonville, FL.

In 2010 prices fell in 70 percent of the top 50 markets as the national unemployment rate stayed above 9.5 percent. Moreover, it was a turbulent time, with 36 major markets seeing price swings of more than 6 percent at some point during the year.

“2011 should be more consistent, price-wise, both for the better and worse,” Clear Capital said. Typically markets with both high unemployment and high REO saturation are troubled and will experience large declines. Areas with either one or the other, high unemployment or REO saturation, may be able to stave off big declines if not too severe, but either one can still be enough to drive prices down.”

Unlike 2010, when prices rose during the first half and then fell, in 2011 nearly half of the projected yearly declines are expected to take place in the first quarter. During the middle months price growth will be unchanged and most markets declines will decline again in the final quarter. Of the 50 major markets, 14 are expected to sustain gains in the latter half of 2011, Clear Capital said.

For a copy of the full forecast, including forecasts for the top 50 markets, click on the link at the top of the page.