Regional Housing Markets Continue to Strengthen, Updated Index Reveals

The year 2016 marked a second consecutive year during which the glut of properties owned by banks because borrowers defaulted shrank for most areas of the Fourth Federal Reserve District, according to a December update of the Cleveland Fed’s Community Stabilization Index (CSI).

The continuing decline in the stock of real estate owned, or REO, properties indicates that housing markets are continuing to improve in the District, which comprises Ohio, western Pennsylvania, the northern panhandle of West Virginia, and eastern Kentucky, says Brett Barkley, senior research analyst with the Federal Reserve Bank of Cleveland.

Brett Barkley
Brett Barkley

As mortgage delinquencies and foreclosures have slowed, the number of properties banks own has also declined. For one, banks may have found in previous years that the housing demand simply wasn’t there.

“The data suggest that banks have been more willing or more able to sell their properties of late,” Barkley says. “Some may have held onto them, waiting for housing values to recover before selling them.”

That wait is over in many places, reveals the CSI, an index that provides a relative measure of local housing market conditions and recovery potential. The index, comprising 6 specific measures of housing and credit conditions, is updated annually. For the first time since the CSI’s inception in 2009, the median value of originations and refinances increased in all of the 15 metropolitan statistical areas (MSAs) tracked, and originations activity is up everywhere except the Lima, Ohio, MSA.

Improvements aren’t happening in all communities in the District, a reality visible via the CSI’s interactive maps.

“We don’t see this same kind of functioning housing market coming back to the hardest hit zip codes,” Barkley notes. “In some of the neighborhoods we profile in this update, we’ve seen the stock of REO properties come down, so that trend is good, but originations activity and the median value of those originations have not experienced a sustained positive trend.”

Public investment will continue to play a vital role to support innovative revitalization efforts ongoing in the corners of the region distressed most by the foreclosure crisis, among them Ohio locales such as the West Park neighborhood in Canton, the Slavic Village neighborhood in Cleveland, and parts of Northwest and Southwest Warren. For more on the work being done in these areas, view the full report.

The CSI drills down to the zip code level, Barkley says. That’s important for organizations working in places where social and economic data are not publicly available at small geographies like they are through databases such as NEO CANDO.

“Through the CSI, community development industry stakeholders can view these indicators in specific areas and have an idea of what the trends are, what investments are still needed, and where they could target their resources,” he says.