Home prices as reflected in the Lender Processing Services Home Price Index (LPS HPI) “increased nationally for the first time since March 2010 and for only the third time in five years,” according to Raj Dosaj, the company’s vice president of applied Analytics. The HPI, which covered home sales through February, was up 0.2 percent from the previous month to $195,000, a level last seen in June 2003. The preliminary estimate for March is for the index to remain unchanged at $195,000.
The increase was unexpected as the LPS HPI report for January had estimated a -0.3 percent change which LPS now says did not reflect the positive changes in the economy that were evident after the months complete sales data was available.
In April 2007 the HPI peaked at $262. During the most rapid period of decline which started then and extended through April 2009, the HPI fell an average of 9.3 percent a year then slowed to -1.1 during a period (April, 2009 to April 2010) which roughly coincided with the availability of the homebuyer tax credit. The expiration of that credit marks the start of a steadier decline when prices fell an average of 4.5 percent a year.
February statistics for the 585 metropolitan statistical areas (MSAs) tracked by LPS are mixed. In 20 states prices increased for all MSAs, a total of 199, and prices increased in 334 of all MSAs. LPS said this was its first report in which the majorities of MSAs it covers had increasing prices. Four of the MSAs saw increases of 1.0 percent or more month-over-month, Honolulu, Portland, Oregon; Seattle, and Tampa.
The difference between foreclosure sale and short-sale prices has historically been notable, 10 percent or more. In general LPS says, borrowers undergoing short sales are motivated to do so to protect their credit to the extent possible and they tend to maintain their properties in better condition than do borrowers undergoing foreclosure. While this is still the case, the task of managing the large number of distressed properties today is immense which may, in some cases, contribute to “suboptimal pricing” of some distressed properties.
LPS provided a table which presents discounts at the four dates indicated in the chart above. After the bubble, both numbers have increased but short-sale discounts increased a bit faster so the difference has shrunk.
The LPS HPI is constructed using a repeat sales analysis of home prices as of their transaction dates and combining it with its loan level database. LPS covers about 75 percent of single-family residential properties in the U.S. and is able to report on about 98 percent of those at the ZIP-code level.