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Declining REOs Could Stabilize Home Prices

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(Sacramento, CA)
Thursday, June 9, 2011

The number of bank-owned homes in the Sacramento area appears to be dropping.

The current Real Estate Owned or REO saturation rate is 44%, down from 45.5%, according to home-price tracking firm Clear Capital.

"Even though we're inching down just a little bit, it's more about the trajectory than the absolute values."

Clear Capital's Alex Villacorta explains - the more downward momentum there is in the REO saturation rate, the more prices become stable and even start to increase.

Area home prices hit their peak in October 2005. Since then, they've plunged by nearly 60%.

Despite a brief bump triggered by recent federal home-buyer tax incentives, prices are back to where they were a decade ago.

"There was some uplift through the tax credits over the last couple of years. But the fact that prices are back to where they were in 2001 and back to where they were in Q1 2009 shows the relative weakness in this market still."

Sacramento area home prices are currently 8% lower than they were a year ago.

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