REO Saturation Rate Falls for First Time in 2012

While home prices remained little changed, the REO saturation rate fell for the first time this year, according to Clear Capital’s Home Data Index Market report, which included data to the end of August.

The REO saturation rate, which calculates the portion of REO sales relative to total sales, slipped 6.4 percentage points from the previous quarter to 20.5 percent. The drop is the lowest the REO saturation rate has been since April 2008. At its peak, the REO saturation rate was 40.2 percent in the first quarter of 2009. Although the market is seeing a decrease in the volume of REO sales, fair market sale volumes are increasing, leading to more activity in the owner-occupied sector, the real estate data provider explained.
According to the report, the first phase of the recovery was strengthened by REO-only price trends, but August gains were due largely to strengthening in the fair market segment as investment purchases slow down. “Sustained growth in the fair market segment could build a foundation for Phase Two of the recovery,” Clear Capital stated.
Home prices, which include sales prices for REOs, increased 1.9 percent on a quarterly basis in August, little changed from the 2 percent quarterly gain in July. Year-over-year, home prices rose 2.9 percent. All four regions saw price gains, with the West leading growth with a 3.8 percent quarterly increase and 7.7 percent yearly rise. Prices in the Midwest rose for the first time since April 2010 on a yearly basis, edging up 0.5 percent; quarter-over-quarter, prices were up 2 percent. Prices increased quarterly and yearly in the South by 1.5 percent and 2.5 percent, respectively. The Northeast saw respective quarterly and yearly increases of 0.5 percent and 1.3 percent.Quarter-over-quarter, two metros posted double-digit gains: Milwaukee, Wisconsin (12.5 percent) and Seattle (10.4 percent). Despite having an REO saturation of 48.8 percent, Detroit managed to see a 5.9 percent price gain, but still experienced a yearly decline of 1.7 percent.

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