Location: Washington, DC
Author: Corinne Russell
Date: Wednesday, February 27, 2008
U.S. home prices fell in the fourth quarter of 2007 according to OFHEO's seasonally-adjusted purchase-only house price index. The index, which is based on data from home sales, was 1.3 percent lower on a seasonally-adjusted basis in the fourth quarter than in the third quarter of 2007. This decline was substantially greater than the 0.3 percent price decline between the second and third quarters. Over the past year, prices fell 0.3 percent, as the fourth quarter decline erased earlier price gains.
OFHEO's all-transactions House Price Index (HPI), which includes data from home sales and appraisals for refinancings, showed less weakness than the purchase-only index. The all-transactions HPI rose 0.1 percent over the latest quarter and 0.8 percent over the latest year.
The figures were released today by OFHEO Director James B. Lockhart, as part of the quarterly report analyzing housing price appreciation trends. "Although prices for home purchases in the quarter fell in every state except Maine, only 16 states plus the District of Columbia showed price declines for the full year 2007," said Lockhart. "While the market weakness is most significant in areas that saw the greatest price run-ups during the boom, other states have clearly not been immune to recent declines."
"The year 2007 showed the first four-quarter decline in the purchase-only index since its earliest data in 1991," Lockhart added. "However, both OFHEO's purchase-only index and the all-transactions index show relatively greater house price stability than do other nationwide house price indexes. That may reflect, in part, the greater stability in the prime, conforming mortgage market served by the Enterprises than in other segments of the mortgage market," said Lockhart.
New in this release are monthly purchase-only indexes through December 2007 for the nine Census Divisions and the U.S. The new series indicates that seasonally adjusted prices declined 0.2 percent in December across the U.S., on average. This is the sixth consecutive monthly decline, bringing the total drop from the April 2007 peak to 2.4 percent.
"Given the recent turmoil in housing markets we thought it would be helpful to provide a greater amount of information about price trends," Lockhart said.
Beginning in March and on a monthly basis thereafter, OFHEO will provide news releases containing updated monthly indexes, with a two-month lag. For example, the March release will include January data. OFHEO's quarterly house price releases will continue and will include both the quarterly and monthly information.
Nationally, house prices grew at a much slower rate over the last year than did prices of non-housing goods and services. While the national purchase-only house price index fell 0.3 percent between the fourth quarters of 2006 and 2007, prices of other goods and services rose 4.3 percent. The real price of homes thus fell 4.6 percent over the latest four quarters.
"While the declines are significant and quite large in some areas, the market still needs to work through its overhang of unsold inventory," said OFHEO Chief Economist Patrick Lawler. "How much further down that inventory will ultimately push prices will depend on a number of factors, including what happens to interest rates and the overall health of the U.S. economy," Lawler said.
Significant Findings:
Purchase-only Index:
1. The four-quarter decline in the purchase-only index was the first since at least 1991Q1 (the first period covered by that index).
2. Prices fell between the third and fourth quarters in every state except Maine.
3. Every Census Division also experienced a price decline between the third and fourth quarters. Prices were weakest in the Pacific Census Division, which experienced a 4.5 percent price decline in the quarter.
All- transactions HPI:
4. The states with the greatest rates of appreciation between the fourth quarter of 2006 and the fourth quarter of 2007 were: Utah (9.3 percent), Wyoming (8.3 percent), North Dakota (7.9 percent), Montana (6.9 percent), and Alaska (six percent). The states with the lowest rates of appreciation for the same period were: California (-6.6 percent), Nevada (-5.9 percent), Florida (-4.7 percent), Michigan (-4.3 percent), and Rhode Island (-2.6 percent).
5. The Metropolitan Statistical Areas (MSAs) with the greatest rates of appreciation between the fourth quarter of 2006 and the fourth quarter of 2007 were: Wenatchee, Washington (13.7 percent), Houma-Bayou, Louisiana (12.2 percent), and Grand Junction, Colorado (12 percent). The MSAs with the lowest rates of appreciation for the same period were: Merced, California (-19 percent), Modesto, California (-15.5 percent), and Stockton, California (-15.3 percent).
6. Of the 291 cities on OFHEO's list of "ranked" MSAs, 192 had positive four-quarter appreciation and 99 had price declines.
7. Of the 20 ranked cities with the greatest price declines over the latest four quarters, all but two were in California or Florida (Nevada and Michigan accounted for the remainder).
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