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Clear Capital Reports 4.1% Drop in Home Prices in 2010

By: Carrie Bay

Clear Water has released its home price report for the 2010 calendar year. The company’s analysis shows that compared to where prices were at the end of 2009, nationally, residential properties lost 4.1 percent of their value over the last 12 months, with 70 percent of major markets reporting price declines for the year.

The California-based valuation firm is forecasting home prices nationally to fall by another 3.7 percent by the end of 2011. Dr. Alex Villacorta is Clear Capital’s senior statistician, and he says the two clear drivers of individual market results will be local unemployment rates and the prevalence of distressed homes.

“Some housing markets are well on their way to recovery, while others are experiencing a renewed downturn reminiscent of the housing crash only two years ago,” Villacorta said.

Clear Capital describes the movement in home prices during 2010 as “turbulent,” with prices increasing 9.7 percent over a 21 week span (late March to mid August), only to be followed by a decline of 9.4 percent over the following 19 weeks (September to December).

“In terms of home prices, this past year has certainly been characterized by uncertainty,” said Villacorta. “Tax incentives and high levels of distressed sale activity had counter effects on home prices which contributed to the fragility of the markets.”

But even with the volatility, Clear Capital says the “rapid and severe” depreciation dives during the months when

the crash echoed the loudest have subsided. Only eight major markets in the company’s study experienced double digit home price declines in 2010:

  • Dayton, Ohio (-22.3%)
  • Columbus, Ohio (-17.0%)
  • Milwaukee, Wisconsin (-13.1%)
  • Tucson, Arizona (-12.3%)
  • New Haven, Connecticut (-11.7%)
  • Jacksonville, Florida (-11.1%)
  • Virginia Beach, Virginia (-10.3%)
  • Richmond, Virginia (-10.2%)

To illustrate the uncharacteristic volatility of 2010, Clear Capital points out that of the top 50 major markets, 38 saw price swings of more than six percent at some point last year. Conversely, from the middle of 2002 through mid 2009, the company says national prices only changed direction once and at no point were there quarterly price swings from negative to positive gains of more than one percent in consecutive quarters.

At the beginning of 2010, national prices saw a 10.1 percent price swing from price declines to price growth, as measured by Clear Capital’s index. As the effects of the tax credit wore off, national prices reversed this pattern during the latter half of 2010, posting a 7.4 percent price swing into negative territory for consecutive quarters.

Clear Capital says the wild spikes experienced in 2010 will likely be replaced with more gradual price trends this year. The company’s price forecasts show varying levels of decline across all four regions in 2011, with local markets in the West expected to accumulate the largest overall losses.

Major cities in the western Gulf states and Washington, D.C. are least likely to see high dollar declines in home values, according to Clear Capital’s projections. Washington, D.C. follows up its strong performance in 2010 with an expected 6.5 percent year-over-year gain in 2011.

The company says a 7.9 percent state unemployment rate bodes well for major markets in Texas, as well, with home prices forecast to gain 3.6 percent in Houston and 1.4 percent in Dallas over the course of this year.