OXFORD — The latest FNC Residential Price Index (RPI) shows continuing momentum in the U.S. housing market with home prices rising to a two-year high in December. Despite an unexpected deceleration in economic growth, the ongoing housing recovery has maintained its pace with steady gains in home prices, sending the index up 5.4 percent year to date.
A stabilizing foreclosure market is contributing to the recovery of the underlying property values. While challenges remain for many hard-hit markets, particularly those undergoing a judicial process for home foreclosures, there are signs that foreclosure prices have bottomed out — the first encouraging development in the long housing recession where a rising underlying market and stabilizing foreclosure prices co-exist. Foreclosures as a percentage of total home sales were 17.8 percent in December, down from 24.0 percent a year ago.
Based on recorded sales of non-distressed properties (existing and new homes) in the 100 largest metropolitan areas, the FNC 100-MSA composite index shows that December home prices remained relatively unchanged from the previous month, but were up 4.9 percent on a year-over-year basis from the same period in 2011. On a quarterly basis, home prices were up 0.6 percent during the fourth quarter. When compared to the same period in 2011, the quarterly price gain was 4.3 percent. The 30-MSA and 10-MSA composite indices show similar trends of continued price momentum, relatively unchanged from November and up 5.8 percent from December 2011.
FNC’s RPI is the mortgage industry’s first hedonic price index built on a comprehensive database that blends public records of residential sales prices with real-time appraisals of property and neighborhood attributes. As a gauge of underlying home values, the RPI excludes sales of foreclosed homes, which are frequently sold with large price discounts reflecting poor property conditions.
Half of the component markets tracked by the FNC 30-MSA composite index show rising prices in December. Phoenix and Las Vegas recorded the largest price increase, up 2.1 percent and 2.0 percent respectively from November. In a sign that the recovery is taking hold, foreclosure activities have dropped rapidly in Phoenix and Las Vegas. Both cities saw a big decline in foreclosure sales in the last 12 months. The steady price recovery in the California cities of Riverside and Sacramento is likewise accompanied by rapid declines in foreclosure activities. Most notably, markets with a strong recovery in recent months tend to be those which were the speculative markets during the subprime frenzy.
Although signs of a housing recovery are widening, the degree of market improvement is inconsistent across the country. In Baltimore, Chicago, Houston, and San Antonio, prices were relatively flat over the last 12 months (year-to-year change). In contrast, Phoenix and Denver saw a double-digit growth, led by Phoenix at nearly 23 percent. The Chicago market continues to underperform other major cities that make up the FNC 30-MSA composite index. The city’s home prices were up only 1.0 percent on a year-over-year basis, compared to an average of 5.0 percent among the nation’s largest cities.