JACKSONVILLE, Fla. – May 10, 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 February 2012.
"Our HPI shows an increase in seasonally adjusted prices this month for the first time since March 2010, and for only the third time in five years,” said Raj Dosaj, vice president of LPS Applied Analytics. “There have been signs of price declines slowing for a few months now, and our estimates for next month are flat to slightly positive. Without a pickup in sales volumes from their current anemic levels, it’s hard to be more optimistic that the market may be nearing the end of its fall.
“Reasons for caution are clear, as we’ve been here before. Non-seasonally adjusted prices increased for a few months in early 2009, 2010 and 2011 – trends that all ended by summer, after which all the gains – and then some – were lost. As is true this month, those temporary increases were on low sales volumes – about 30 percent lower than at any point since 1998. Furthermore, the inventory of distressed homes remains high, which will continue to put a drag on prices.”
The updated LPS HPI national home price for transactions during February 2012 increased 0.2 percent to a level on par with those seen in June 2003: $195,000 (Figure 1, Table 1). Prices and changes for February 2012, along with preliminary estimates for March 2012, are:
||March 2012 Estimate|
LPS HPI national average home price (in $ thousands)as of month ends shown
|Observed and estimated national average home price changes during months shown
The LPS HPI January report estimated that February’s change would be approximately -0.3 percent based on the better-than-estimated price movement reflected in January numbers. However, estimates of this nature are subject to market shifts, and in this case, the -0.3 percent estimate did not reflect the positive changes in the economy that were evident after the months’ complete sales data was available. The actual change for February was +0.2, representing a .5 variance from the estimate.
During the period of most rapid price declines, from April 2007 through April 2009, the LPS HPI national home price fell at an average annual rate of 9.3 percent. The break of the post-bubble price movements into two periods, observable in the updated HPI last month, is clearer in the seasonally adjusted HPI this month. The slowest declining trend lasted from about April 2009 to April 2010, dates which are marked in Figure 1. This interval differs somewhat from our previous report because the seasonally adjusted data make the turning points less ambiguous. The expiration of the first-time buyers’ tax incentive in April 2010 marks the start of a steadier decline in house prices. Figure 1 shows the trends for the three different post-bubble intervals.
Price changes during February among metropolitan statistical areas (MSAs) were mixed. Of the more than 585 MSAs the LPS HPI now covers, prices increased for all of the MSAs (199) in 20 states. In addition, while average prices did not increase for all MSAs in the remaining states, prices increased in a total of 334 MSAs. This is the first LPS HPI report in which the majority of MSAs covered by LPS data had increasing prices.
Among the MSAs for which both LPS and the Bureau of Labor Statistics provide data, listed in Table 1, average prices decreased during February only for the following MSAs in California: Los Angeles, San Diego and San Francisco. Four MSAs in Table 1 saw increases of 1.0 percent or more month-over-month: Honolulu; Portland, Ore.; Seattle and Tampa. Table 1 also shows the dates of the local market peaks for each of the largest 26 MSAs. Pittsburgh is the only MSA that, with clear seasonal variations, has seen its average house price rise continuously since January 2005.
The difference between foreclosure sale and short-sale prices, now reported in the updated LPS HPI, provides an interesting perspective on the state of the national housing market. Historically, the difference between foreclosure- and short-sale prices has been notable ̶ 10 percent and more. In general, borrowers undergoing short sales are motivated to do so to protect their credit to the extent possible and tend to maintain better condition of their properties than borrowers undergoing foreclosure.
In some parts of the country this is still the case. However, the task of managing the large number of distressed properties in the market today is immense, which may, in some cases, contribute to suboptimal pricing of some distressed properties.
The table below presents discounts at the four dates indicated in Figure 1. After the bubble, both numbers have increased, but short-sale discounts increased a bit faster, so the difference has shrunk.
|LPS HPI national home prices
(in $ thousands) before and after the rapid fall …
|Foreclosure sale discounts from home prices for these dates
|Short sale discounts from home prices for these dates
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 their transaction dates. Each month for each of more than 15,500 U.S. ZIP codes, the LPS HPI reports five price levels (quintiles) and corresponding discounts from these normal market prices for foreclosure (REO) and short sales. This level of detail is provided for four property groupings in every ZIP code: i) all residential properties, ii) condominiums, iii) single-family housing and iv) other types of residential properties. Home prices are available with or without seasonal adjustments; REO and short-sale discounts do not vary materially with seasonal variations and so need no adjustment. The LPS HPI provides aggregates of all these values for larger geographies than ZIP codes; the aggregates comprise cities, counties, states, the nation and statistical areas defined by the White House Office of Management and Budget. 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 sales 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.
Updated data in the LPS HPI, such as foreclosure and short sale information on the MSAs in Table 1, or other levels of geographic resolution, are available upon request and at the discretion of LPS Applied Analytics.
About Lender Processing Services
Lender Processing Services (NYSE: LPS) delivers comprehensive technology solutions and services, as well as powerful data and analytics, to the nation’s top mortgage lenders, servicers and investors. As a proven and trusted partner with deep client relationships, LPS offers the only end-to-end suite of solutions that provides major U.S. banks and many federal government agencies the technology and data needed to support mortgage lending and servicing operations, meet unique regulatory and compliance requirements and mitigate risk.
These integrated solutions support origination, servicing, portfolio retention and default servicing. LPS’ servicing solutions include MSP, the industry’s leading loan-servicing platform, which is used to service approximately 50 percent of all U.S. mortgages by dollar volume. The company also provides proprietary data and analytics for the mortgage, real estate and capital markets industries.
LPS is headquartered in Jacksonville, Fla., and employs approximately 8,000 professionals. For more information, please visit www.lpsvcs.com