OFHEO Says House Prices Rose in Fourth Quarter--Check Out Your Own City

Posted by: Peter Coy on March 1, 2007

The Office of Federal Housing Enterprise Oversight says that house prices rose 1.1% in the fourth quarter of 2006 from the third-quarter level. That put them 5.9% higher than they were in the fourth quarter of 2005. Here’s a link to the report. Prices of non-shelter items in the Consumer Price Index rose just 0.9% over the past year, so housing continued to be an inflation leader.


Biggest gainers in the fourth quarter compared to a year earlier were:
Bend, Ore: Up 21%
Wenatchee, Wash.: Up 21%
Provo-Orem, Utah: Up 20%

Biggest losers were:
Kokomo, Ind.: Down 5%
Santa Barbara, Calif.: Down 4%
Jackson, Mich.: Down 4%

OFHEO covers 282 metro areas. Click on the link above to see where yours stacks up.

Reader Comments

Peter Coy

March 1, 2007 2:34 PM

A smart comment today by Patrick Newport of Global Insight on limitations of the OFHEO House Price Indicator (HPI):

Still, the index has a few limitations, and the latest release is probably overstating the rate of price increases. First, the broad HPI includes homes refinanced, not just homes that have been sold, and this has recently given the index an upward bias. The purchase-only index, which strips out refinancing, has been growing nearly 2 percentage points less than the HPI index over the past two years. Purchase-only indexes, unfortunately, are not available for states or MSAs. Second, by its nature (as a repeat sales index), the HPI does not include new homes. It only looks at properties on which at least two mortgages have been originated since 1975. Also, downward pressure on new home prices is more intense in this phase of the housing cycle than for existing homes, since existing-home owners are under less pressure to sell than are builders sitting on empty new homes. Third, the representation of high-end properties is limited in the HPI, because it includes only properties with mortgages purchased by Fannie Mae or Freddie Mac, which have a cut-off mortgage size above which they will not buy. As a result, it may be excluding some high-end properties under the most downward price pressure. Finally, the data are already three months old, and so do not measure what has happened recently.

James

March 12, 2007 6:06 PM

It should be pointed out that the new S&P/Case-Shiller Home Price Index, which is similar in many ways to the OFHEO House Price Index, is showing declining prices in the fourth quarter of 2006. S&P is also showing declining prices for most metro areas it covers. I have graphs on my web page that show the decline. Go to http://www.jparsons.net/housingbubble/ to see them.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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