JACKSONVILLE, Fla. – March 7, 2012 – Lender Processing Services, Inc.
(NYSE: LPS), a leading provider of technology, data and analytics for the mortgage and real estate industries, today announced that its LPS Applied Analytics division updated its home price index (LPS HPI) with residential sales concluded during December 2011.
LPS also announced that beginning next month (transactions of January 2012), the report will be based on an updated view of market structure. “Following the real estate bubble, the proportion of short-sale transactions is much higher than historically observed. Other HPI suppliers have not updated their analyses in the face of increased short-sale transactions. Identifying and correctly accounting for short-sale price discounts produces an HPI that better represents non-distressed sales,” said Raj Dosaj, vice president of LPS Applied Analytics.
The LPS HPI national average home price for transactions during December 2011 reached a price level not seen since September 2002 (Figure 1, Table 1). This is the sixth consecutive month of price decreases. Average prices for November and December and the preliminary estimates for January and corresponding monthly changes are as follows:
|LPS HPI national average home price
(in $ thousands) as of …
|Observed and estimated national average
home price changes during the months of…
The LPS HPI November report estimated December’s change at -0.8 percent, a somewhat smaller decline than was observed.
LPS HPI average national home prices continued the downward trend begun after the market peak in June 2006. The total values of the LPS sample, the “LPS national market collateral,” at the peak and for December 2011 are as follows:
|LPS total national market values (in $ trillion)
at market peak and December 2011:
The average home prices since the market peak at key time points shown in Figure 1 are as follows:
LPS HPI national average home prices
(in $ thousands) before and after the rapid
|fall, and as of December 2011…
Figure 1 Prices have declined since autumn 2008 at a slower rate than immediately following the market peak. Prices have not been at the current level since October 2002.
During the period of most rapid price declines, from June 2007 through December 2008, the LPS HPI national average home price fell at an average annual rate of 13.8 percent.
Since December 2008, prices have fallen more slowly at an average annual rate of 4.4 percent (Figure 1). Figure 1 also shows that the LPS HPI national average home price in December appeared to continue the seasonal pattern that has modulated prices since 2009. Other HPI suppliers have also reported strong seasonal variations in the post-bubble market. LPS has found that while seasonal variations occur in the market for un-distressed home sales – due to school schedules, for example – short sales do not vary over the year nearly as much.
The apparently significant seasonal effects LPS and others have reported are a consequence of the large proportion of short sales among home sales after the bubble. These sales have been treated as if they experienced typical seasonal variations and thus they exaggerated seasonal price variations. Beginning next month with the updated LPS HPI, non-distressed prices will show milder seasonal variations, more consistent with previous years.
Price changes were largely consistent across the country during December, increasing in only 8.0 percent of the ZIP codes in the LPS HPI. Price changes were also consistent across price tiers with a uniform decline of 1.0 percent.
Changes during December were largely consistent among metropolitan statistical areas (MSAs). Of the 411 MSAs the LPS HPI covers, average prices declined for all of the MSAs (374) in 44 states. In addition, while average prices did not decline for all MSAs in the remaining states, prices fell in a total of 402 MSAs out of the LPS HPI 411.
Among the MSAs for which both LPS and the Bureau of Labor Statistics provide data, listed in Table 1, only Phoenix and Miami saw average prices increase during December. Many of these MSAs saw decreases during December. Half of the MSAs in Table 1 saw declines of more than 1.0 percent over the month. San Francisco, San Diego, Detroit, Chicago and Atlanta all declined by more than 1.5 percent.
Table 1 shows the dates of the local market peaks for each of the largest 26 MSAs. Pittsburgh is the only MSA that, with seasonal variations, has seen its average home price rise continuously since January 2005.
“Despite the broad picture of home price declines following the bubble, prices have not been consistently declining for all MSAs in the country. About one-fifth (89) of all the MSAs that LPS covers has seen average home prices increase since December 2008,” commented Dosaj. “For 90 percent of these MSAs, prices rose only if the lowest-priced homes in their markets rose. This correlation did not necessarily hold for higher-priced homes in those areas. Unfortunately, the MSAs that have seen price increases since December 2008 are generally relatively small; Boston and Pittsburgh are exceptions.”
Examples of MSAs that have seen increases in average home prices since December 2008 on the larger end of the spectrum are: Springfield, Mass., Albany, N.Y., Brownsville, Texas and Hot Springs, Ark. States with the highest percentage of MSAs whose prices increased are mostly in the West North Central Census Division – Minnesota, Missouri and Nebraska – and in the Middle Atlantic Division – New York and Pennsylvania.
The median LPS total market collateral of these smaller MSAs that have seen average home prices increase is $13.7 billion. For comparison, the median of the MSAs listed in Table 1 is $250 billion.
Table 1 Summary of home price histories for the nation and the 26 largest MSAs covered by both LPS and the Bureau of Labor Statistics. Small graphs show prices for each MSA from January 2005 through December 2011. The dates of the peaks in the local markets are indicated below the MSA names. Column labels indicate dates for prices and changes to date. The numbers beneath the prices for December 31, 2011 indicate the relative ranking of the MSA average prices.
About the LPS Home Price Index
The LPS HPI is one of the most complete and accurate home price sources available. It summarizes sales concluded during each month using a repeat sales analysis of home prices as of the transaction dates. Each month, the LPS HPI reports five price levels in each of more than 14,500 U.S. ZIP codes. Five price levels are also reported at the national and state levels and for 436 of the statistical areas defined by the White House Office of Management and Budget; including all 29 of the Metropolitan Divisions and their 11 MSA “parents.” The five historical paths of price levels can be easily used to find price paths of intermediate prices. The LPS HPI also supplies REO discount rates for each ZIP code, which are used in the HPI calculations to correct for the impact on estimates of open-market prices that REO sale prices would have.
By combining property and loan data in its repeat sales analysis, the LPS HPI covers about 75 percent of single-family residential properties in the U.S. The innovative approach used to maximize geographical resolution enables the LPS HPI to meaningfully cover about 98 percent of these properties at the ZIP-code level.
The LPS HPI provides the financial industry with the most accurately timed home-price information available – detecting market changes sooner than other HPIs – with valuation accuracies competitive with AVMs in out-of-sample tests.
About Lender Processing Services
Lender Processing Services, Inc. (LPS) is a leading provider of integrated technology, services, and mortgage performance data and analytics to the mortgage and real estate industries. LPS offers solutions that span the mortgage continuum, including lead generation, origination, servicing, workflow automation, portfolio retention and default, augmented by the company's award-winning customer support and professional services. Approximately 50 percent of all U.S. mortgages by dollar volume are serviced using LPS' loan servicing platform, MSP. LPS also offers proprietary mortgage and real estate data and analytics for the mortgage and capital markets industries. For more information about LPS, visit www.lpsvcs.com
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