It's not exactly like waiting for Christmas or the first day of summer vacation,
but we do look forward to the release of our favorite housing report each quarter;
the Office of Federal Housing Enterprise Oversight (OFHEO) House Price
The HPI uses information from Freddie Mac and Fannie Mae (for which OFHEO has
supervisory oversight) to estimate house prices based on mortgage closings of
the same houses over time.
In other words, these are actual one-on-one comparisons of sales prices or
appraisal figures for homes purchased or refinanced over the past 32 years.
If a house has had two mortgage closings through Freddie or Fannie during that
period, it is included in the 32 million transaction data base. However, if
a home sale goes through a different funding source, seller financing or the
subprime market for example; exceeds the dollar limit for conforming mortgages,
or is purchased with cash it will fall outside of the survey universe.
to this methodology is obvious; one is comparing
apples with apples. A house purchased in 1984, refinanced in 1990, sold again
in 1998 and refinanced in the first quarter of 2007 will have four data points
in the system upon which to construct a portrait of appreciation. The disadvantages
of course are that there is no way to necessarily account for property improvements
which would drive home price increases beyond the general appreciation in the
area and higher priced properties are pretty much excluded from the survey,
as are purchases and refinances where the major secondary market participants
do not play a role.
The HPI for the first quarter of 2007 was released on Thursday and showed a
price appreciation that was 0.5 percent higher than in the
fourth quarter of 2006. This is the lowest quarterly appreciation recorded since
the first quarter of 1998 and compares poorly to the price appreciation experienced
between the two previous quarters, (Q3 and Q4 of 2006) of 1.3 percent. Prices
in the first quarter of 2007, however, were 4.3 percent higher than in the same
quarter in 2006 but again this is the lowest year-over-year appreciation since
the third quarter of 1997.
When refinances are filtered out of the data and only information on home purchases
is included, the price appreciation between quarter one of 2006 and the same
period in 2007 was only 3.0 percent.
OFHEO Director James B. Lockhart said "Although some forecasters
expected to see a drop in the HPI, nationwide house prices continued to rise
in the first quarter of 2007, albeit at the lowest rate in 10 years. As always,
real estate prices are local with seven states showing double-digit annual appreciation
rates and seven with rates less than 20 percent. Seven states, including Florida
and California, also showed home price depreciation in the first quarter."
Still, house prices grew faster over the past year than prices of non-housing
goods and services. The 4.3 growth in home price appreciation compares favorably
to the non-housing Consumer Price Index of 1.6 percent.
Of course, as Director Lockhart pointed out, all real estate is local and the
Mountain Census Division had the strongest housing market with a quarterly appreciation
of 1.11 percent and a one-year increase of 7.47 percent. The four states, Utah
(17.0 percent,) Idaho (12.3 percent,) Montana and Wyoming (11.7 percent each)
with the greatest four-quarter appreciation were all located in the Mountain
The other states topping the chart were New Mexico (11.21
percent) and Oregon (10.77 percent.)
The West South Central region was tied with a quarterly growth of 1.11 percent
and second on an annual basis at 6.75 percent. New England trailed the nation
with a quarterly price appreciation of 0.03 and a yearly increase of 1.11 percent.
Washington State, in the otherwise low ranked (6th) Pacific Census Division,
also fared well, coming in fifth as a state with 11.63 yearly growth. The state
also had five of the 20 cities with the greatest four quarter appreciation.
Only five of Washington's 12 largest metro areas had an appreciation rate
of less than 10 percent.
On the down side, the seven states that showed negative
appreciation for the quarter were Florida (-0.34), West Virginia (-0.19),
Maine (-0.13), California (-0.84), Nevada (-0.52), Massachusetts (0.47), and
Michigan (-0.20). The last two states also had a negative rate of appreciation
year-over-year of -0.56 and -0.66 respectively.
Data on hundreds of large and medium sized metropolitan areas are included
in the OFEHO study. To see how your locality ranks over the last quarter, year,
and five year period in terms of house price appreciation visit the website