Home Prices Increase in January, Though Market Remains Uncertain

By Kyle Chezum Updated on 2/3/2011

2/03/11

According to the Clear Capital home price index, home prices increased in thirteen major markets during the month of January.  Alex Villacorta, a senior statistician with Clear Capital, says home prices haven’t increased since the federal tax credit was put together in April of 2010.  Cleveland, OH, saw the highest increase.  Average home prices in the area rose by 12.6% during the month, still 55% below their 2006 peak.

The price gains are unusual for this time of year and may signal a slow return to health in the housing sector.  The increase is tied to a “deceleration” in foreclosed homes placed up for sale.  Though the number of foreclosed homes available increased by about 1.4% over last month’s levels, the rate of increase has slowed from 3.2%.

Clear Capital reported an annual home price decrease of 4.1% at the end of 2010 and forecast a steady drop of 3.6% for 2011.  January’s report shows a contrast to these expectations, but the market is still highly volatile and the upward fluctuation may be temporary.

"This recent national change in price direction is encouraging for the overall housing sector, yet it is still too early to determine whether this current uptick in home prices is a temporary reprieve or the start of a sustained recovery," Villacorta said.  Other economists have echoed this sentiment.  RealtyTrac vice president Rick Sharga says major banks haven’t released up to 70% of all home foreclosed.

Standard & Poor shared information that has led many economists to conclude new foreclosures will reach a new high in 2011.  Foreclosure levels hit an all-time high last year despite foreclosure moratoria imposed by most major banks and legal battles that kept many repossessed properties off the market.  With much of last year’s litigation out of the way, more of these properties may be made available for sale.  This event could further shake the stability of the housing sector yet again.

Rates for 30 year fixed rate mortgages increased again last week, up a tenth of a percent to 4.81% from 4.80%.  Rates have fluctuated up and down since the middle of December.  All other mortgage types saw a decrease in interest rates last month.  It’s uncertain how these rate adjustments will affect the industry.

Still, the news is unexpectedly good.  According to Villacorta, “The severity of the downturns observed in October and November have subsided.”