Clear Capital Reports 7.3% U.S. Home Price Page 1 of 9

Gains, Softening REO Influences

Clear Capital Reports 7.3% U.S. Home

Price Gains, Softening REO Influences

National price gains continue positive climb; real estate owned

(REO) saturation rates decline; Los Angeles and Fresno markets

show positive quarterly price gains for the first time since 2006;

and Chicago achieves its largest quarterly gain this decade.

provider of data and solutions for real estate asset valuation, investment and risk

assessment, today released its Home Data Index™ (HDI) Market Report. Patent pending

rolling quarter technology significantly reduces the multi-month lag time associated with

other indices to help investors, loan servicers and individual buyers and sellers make more

informed, timely and profitable decisions. This month’s report features data compiled

through August 25, 2009.

Key report highlights include:

with the Midwest (16.4), South (5.7), Northeast (5.4), and West (3.0) regions all

continuing to post gains. The national REO saturation rate (percentage of REOs sold

to all properties sold in the last rolling quarter) dropped more than three points since

last month’s report to 30.1 percent.

of the 30 major markets improving over last month’s rates. Los Angeles and Fresno

return first positive quarterly price gains since mid-2006, while REO properties make

up a smaller portion of California sales.

quarterly gain this decade (19.9%).

The Clear Capital HDI Market Report offers the industry, investors and lenders a near realtime

look at pricing conditions not only at the national and metropolitan level, but within local

markets. Clear Capital data is built on the most recent data available from recorder/assessor

offices, and then further enhanced by adding the Company's proprietary market data for the

most comprehensive geographic coverage available.

“The price changes in this month’s highest and lowest performing markets lists speak to the

extremely positive summer home buying season—more than what can be attributed to

seasonality,” said Kevin Marshall, President of Clear Capital.

“While we do expect more REO inventory to hit the market as we close 2009, this dramatic

seasonal price and volume increase in sales of non-REO homes could create positive

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Gains, Softening REO Influences

momentum going into the normally slow fall and winter seasons,” said Marshall. “Buyers are

getting nervous that they are missing the bottom of the market, so they’re choosing to get in

the market now. These factors greatly increase the chances of a springtime recovery next

year.”

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Gains, Softening REO Influences

Distressed sales have outpaced the inflow of new REOs over the last quarter, softening the

downward pressures introduced by REOs and aiding recent price gains. This reduction in the

REO saturation rate improves the chances short term price gains could extend to robust,

longer-term price stabilization.

The national price gains of 7.3 percent for the most recent rolling quarter along with this

month’s 3.2 point drop in REO saturation rates to 30.1 percent suggest improved conditions.

The Midwest, Northeast and South have similar yearly losses, which further highlights the

disparity still present in the REO-saturated West. However, the West did continue to expand

its quarterly price gain to 3.0 percent, while reducing its quarterly REO saturation rate to 41.9

percent—a 3.4 point reduction from last month.

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Gains, Softening REO Influences

Once again Cleveland earned the highest price gains driven by a shift in its market’s

composition. Cleveland’s REO saturation rates plummeted from a late winter record of 58.5

percent to the current level of 35.2 percent. This reflects a decline in REO sales volume

(-29.9%) accompanied by an 82.5 percent increase in the number of fair market sales when

compared to last rolling quarter. In addition, combined sale volumes grew by 16.6 percent;

and the median sale price jumped from $50,000 to $97,500 over the same period.

The magnitude of price gains among the rest of the highest performing markets continues to

climb as well. These gains represent a distinct shift away from the consistently poor market

conditions over the past several years and place many of these markets within striking

distance of returning year-over-year gains.

All but one (St. Louis) of the markets on this month’s list saw declining REO saturation rates

over last month’s figures, indicating improved conditions are spreading beyond the REO

segment of the market.

Chicago (the subject of this month’s micro market analysis) returned to REO saturation levels

the city saw last summer, which is nearly a ten percent improvement over its peak of 42.3

percent last winter. Similar improvement in pricing conditions placed Chicago in sixth

position among the highest performing major markets.

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Gains, Softening REO Influences

The number of major markets on the list with positive quarter-over-quarter price gains grew

to eleven this month. It’s important to note that both the Los Angeles and Fresno markets

experienced quarterly gains for the first time since mid-2006. The REO saturation rates for

both of these California markets also improved 3.1 and 4.1 percent over last month,

respectively.

Phoenix, the focus of last month’s micro market analysis and among the longtime leaders of

price declines, did not make this month’s list with a 4.1 percent price gain for the quarter,

and a 3.1 percent drop in REO saturation to 58.5 percent.

The lowest performing major markets also saw all fifteen markets experience flat or

improving REO saturation rates. The continued growth of positive price gains might indicate

the start of the long process of eroding the stronghold REO properties have had in many of

these markets.

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Gains, Softening REO Influences

This section highlights a single market every month with a deeper dive into how the microand

macro-markets relate to each other.

Chicago’s current quarterly gain is its first in three years. The magnitude (19.9%) of the gain

was large enough to wipe out the losses of last winter, returning home prices to 2008

holiday season levels. This was Chicago’s second largest quarterly price swing of the decade

only surpassed by last fall’s price change of -20.3 percent. This gain is somewhat muted,

however, when put in perspective with Chicago’s market at the beginning of this year when

it reached its peak price decline since 2006 (-54.1%). This month’s price increase moved the

market 9.1 points in a positive direction to -45.0 percent.

Chicago’s yearly losses have generally radiated from the city center out to the suburbs,

mostly avoiding the shores of Lake Michigan. DuPage County experienced a price change of

-13.6 percent over the last year, beating out neighboring Cook County’s -34.8 percent

change.

Cook County’s Lakeview area that surrounds Wrigley field (ZIP 60613) turned in a 2.3

percent yearly gain—the best in the Chicago metropolitan area. In addition, Lakeview is

currently experiencing a modest REO saturation rate of 5.1 percent. Aside from appealing to

sports fans, Lakeview’s quality homes, numerous retail and social locations, and close

proximity to the downtown business core have sustained home prices far better (-2.7%) than

the Chicago MSA (-45.0%) since the market’s peak in 2006.

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Gains, Softening REO Influences

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Gains, Softening REO Influences

The Clear Capital Home Data Index (HDI) provides weighted paired sales, and price-persquare-

foot index models that use multiple sale types, including single-family homes, multifamily

homes and condominiums. These models are combined with an address-level

cascade to provide sale-type-specific analysis for thousands of geographic areas across the

country. The indices include both fair market and institutional (real estate owned)

transactions. They also provide indicators of REO activity such as REO discount rates, REO

days on market and REO saturation. The Clear Capital HDI generates indices in patent

pending rolling quarter intervals that compare the most recent four months to the previous

three months. The rolling quarters have no fixed start date and can be used to generate

indices as data flows in, or at any arbitrary time period.

Clear Capital (www.clearcapital.com) is a premium provider of data and solutions for real

estate asset valuation and risk assessment for large financial services companies. Our

products include appraisals, broker-price opinions, property condition inspections, value

reconciliations, and home data indices. Clear Capital’s combination of progressive

technology, high caliber in-house staff and a well-trained network of more than 40,000 field

experts sets a new standard for accurate, up-to-date and well documented valuation data and

assessments. The Company’s customers include 75 percent of the largest U.S. banks,

investment firms and other financial organizations.

subject property, progressively steps out from the smallest market to larger markets until

data density and statistical confidence are sufficient to return a market trend.

augmenting other, human-based valuation tools. Clear Capital's multi-model approach

combines address-level accuracy with the most current proprietary home pricing data

available.

Management and Budget (OMB) for use by Federal statistical agencies in collecting,

tabulating, and publishing Federal statistics.

time.

square footage over a period of time—most commonly a quarter.

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Gains, Softening REO Influences

the previous three months.