As the housing market and economy continue to build momentum, property values increased in May on both an annual and quarterly basis.
Last month, home prices increased 0.4 percent from the end of 2011, while edging 0.1 percent higher from a year earlier, according to a report from Clear Capital. This is the first time prices have appreciated on a quarterly basis since November 2011.
"National real estate prices in May have finally moved past the continued losses of the last few years," said Clear Capital director of research and analytics Alex Villacorta. "The subsequent stabilization pattern seen in recent months has progressed into the start of moderate growth."
The stabilization of values among real estate-owned properties is believed to be a major factor in the appreciation of overall home prices.
Overall increase offset by decline in Midwest
Regionally, real estate data from the report shows that property values increased in every region of the country with the exception of the Midwest, where they fell 2 percent. Prices rose the most in the West, increasing 2.7 percent from the previous quarter. In addition, there was an appreciation of 1.2 percent in the South during the same period, while values inched 0.4 percent higher in the Northeast.
Specifically, the surge of values in the West was fueled by rising demand for low-priced and distressed properties, including foreclosed houses and short sales. A majority of buyers in this region were interested in properties valued at less than $140,000. However, it was noted that borrowers also targeted homes in the mid- and high-price ranges, but at a much lower rate.
Nearly one in four home sales for distressed properties
But this increased interest in distressed properties isn't just restricted to the West. In fact, according to a recent report from RealtyTrac, roughly 26 percent of all home sales during the first quarter were foreclosures and short sales. The bargain price of these properties is one major factor that continues to attract buyers. At the beginning of 2012, the average price for these homes fell 1 percent from the previous quarter to $161,214.
In the past, distressed properties were often treated as investments. Buyers would purchase these homes, fix them up and sell them for a profit or convert them into affordable rental units. Nowadays, an estimated 92 percent of prospective foreclosure buyers say they plan to occupy the property after then buy it, according to a recent survey conducted by Realtor.com.