Clear Capital price index finds positive signs.

Clear Capital, Truckee, California, found signs of life in some long-depressed housing markets in data gathered through Sept. 25, 2009. The company's Home Data Index[TM] (HDI) Market Report released in early October, for example, found the Baltimore market finally posted positively quarterly home-price gains (0.1 percent) following seven consecutive quarters of price decline.

In other good news, the HDI report found Riverside, California, and Orlando, Florida, had returned their first positive quarterly price gains since mid-2006. Those two metropolitan statistical areas (MSAs) posted gains of 0.5 percent and 1.2 percent, respectively, according to the HDI Market Report.

A release announcing the most recent Clear Capital HDI findings stated, "[I]t's notable that the recent price gains have occurred alongside a record number of REO [real estate-owned] sales. ..." The report tracks what it calls the REO saturation rate, which is defined as the percentage of REOs sold as compared with all properties sold in the most recent rolling quarter.

But the price gains reflected in this early fall report will be tested further as the primary home sales season ends and the market heads into the late fall/early winter slower-sales months.

"As anticipated, the strong gains we've been experiencing this summer are showing signs of softening," said Kevin Marshall, Clear Capital president. "But growth remains sufficiently strong--providing hope as we head into a winter that will test the strength of the recovery," he added.

The latest report found that the national REO saturation rate declined by 1.5 percentage points to 28.6 percent, which was down from the quarterly rate of 30.1 percent posted in August's rolling data. In the report built from August data, the decline in the national REO saturation rate was 3.2 percentage points, so it is definitely getting better at a slower pace.

However, the new report notes that the most recent national REO saturation rate (at 28.6 percent) is still a long way from the 10 percent REO saturation rates seen in 2007.

The Lowest Performing Major Markets identified in the new HDI Market Report showed several markets with extremely high REO saturation rates. Topping the list of worst major markets was Las Vegas-Paradise, Nevada, with a saturation rate of 61.3 percent. Other markets on this list with high REO saturation rates were: Riverside-San Bernardino-Ontario, California (60.8 percent); Dallas-Fort Worth-Arlington, Texas (50.3 percent); Orlando, Florida (47.4 percent); and Houston-Baytown-Sugar Land, Texas (45.7 percent).

The five MSAs on the list of Lowest Performing Major Markets in descending order following first-place Las Vegas were: Tucson, Arizona; Baltimore, Maryland; Seattle-Tacoma, Washington; and Riverside-San Bernardino-Ontario, California. The rankings are listed by quarterly home-price change. The MSA on this list with the worst year over-year price performance was Las Vegas--down 36.6 percent--followed by Orlando, Florida (-33.2 percent).

But the glimmer of hope found in the latest report was that of this list of poor-performing MSAs, only the top two still show negative quarter-over-quarter price changes. That was up from four in the prior month's HDI report. Clear Capital said that Riverside posted a year-over-year price decline of 27.1 percent.

As for the markets doing better than most, the list of Highest Performing Major Markets still shows Cleveland, Ohio's MSA as outperforming the rest of the country in terms of the HDI report. Cleveland's quarterly gains in the new report hit 50.8 percent, with Louisville, Kentucky, following in second place with 19.7 percent quarterly home price gains. Chicago's MSA was in third place (up by 19 percent) and Milwaukee's MSA was next with quarterly gains of 18.8 percent. Of those four MSAs, only Cleveland had positive year-over-year gains.

Of the major MSAs on the highest-performing market list, there were several with notably high REO saturation rates. The ones that stood out with high rates were: Minneapolis-St. Paul-Blooming ton, Minnesota (39.7 percent); Memphis, Tennessee (39 percent); St. Louis, Missouri (38.4 percent); San Francisco-Oakland-Fremont, California (36 percent); and Birmingham-Hoover, Alabama (35.8 percent).

The Clear Capital HDI report explains what is behind the Cleveland housing market's recovery. "Spurred by a growing shift in sales to the non-REO segment of the market, the Cleveland MSA paced the highest-performing major markets for the fourth month in a row, maintaining price gains of more than 50 percent. Even if only the homes in the top price tier (homes valued at more than $160,000) were counted, Cleveland would still return a 19.9 percent quarterly gain, keeping it at the top of the list."

Notably, San Francisco's MSA appeared on the highest-performing major market list for the first time with a "11.9 percent quarterly gain and a 16-percentage-point drop in REO saturation rate from the previous quarter (March 2009 through May 2009). This places San Francisco well below its peak REO saturation rate of 59.7 percent experienced last winter, and like in other markets, reflects a broadening interest in non REO properties," the report stated.

Finally, the latest report noted that although questions remain about the durability of the recovery, "It's encouraging that REO saturation rates continued to improve among 12 of the 15 [highest-performing major] markets."