The OFHEO House Price Index (HPI) usually doesn't get too much attention (except here where we regard it as the best, or at least the most interesting of the periodic housing indicators) but this time around people began anticipating it days before it was actually issued and there was speculation that it would be the harbinger of really bad news to come.

The Index, however, did not show a nationwide drop in housing prices as had been expected, just the smallest increase in many years.

The HPI tracks average house price changes from repeat sales or refinancings of the same single family houses as obtained from data collected and maintained by Freddie Mac and Fannie Mae. The data base contains information on more than 33 million repeat transactions over the last 32 years and the "purchase only" index is based on 4.9 million transactions.

The HPI rose only 0.1 percent in the second quarter of 2007 compared to the first quarter and was the lowest price increase since the fourth quarter of 1994 when the change was -0.23. The second quarter of 2007 showed a price increase of 3.2 percent since the second quarter one year ago. This is the smallest annual price change since 1996-1997 when, for four consecutive quarters the increase year-over-year was at or below 3 percent.

The second quarter price appreciation for homes that were purchased (eliminating data on refinancing) was even lower year-over-year, increasing 2.6 percent. The increase between the first and second quarter was slightly higher than the HPI at 0.5 percent seasonally adjusted.

It is worth noting, as the report does, that the reporting period ended in June, before the recent mortgage market instability which could be reflected in the next HPI report in November.

Even though the pace of price increases has slowed appreciably from that which has been seen over the last few years, it is still running ahead of non-housing goods and services as reflected in the Consumer Price Index. House prices rose 3.2 percent over the past year while the price of others goods and services rose 2.1 percent.

OFHEO Director James B. Lockhart said about the report, "House prices were basically flat in the second quarter despite tightening credit policies, rising foreclosure rates, and weakening buyer sentiment. Significant price declines appear localized in areas with weak economies or where price increases were particularly dramatic during the housing boom."

Utah ranked number one on the basis of a one year price appreciation of 15.28 percent and second for the quarter with prices up 2.66 percent. Wyoming led for the quarter at nearly 3 percent and a yearly appreciation of 12.84 percent. These were the only two states in double digits for the year with Washington, Montana, and New Mexico following behind at 9.12, 9.06, and 8.81 percent respectively.

At the bottom of the heap were Rhode Island with a decline for the year of 0.97 percent and a quarterly loss of 1.74, followed by Massachusetts (-0.99 and -1.09), California (-1.38, -1.21), Michigan (-1.42, -1.43); and Nevada (1.45, 1.62.) Four of these five states were among those that experienced stratospheric increases over the last five years while Michigan never seems to catch a break in good years or bad. These five states with price declines represent the largest number of states in negative figures since 1996-1997.

On a regional basis, the West South Central and the Mountain Census Divisions again had the strongest housing markets with appreciation over the last year of 6.3 percent and 6.1 percent according to the HPI and 5.6 percent and 6.7 percent for the purchase only index.

The New England Census Division continues to have what the report calls "the most anemic" price appreciation at 0.5 percent for the last four quarters. This was more than a full percent below the runner-up East North Central Division.

The Metropolitan Statistical Areas (MSAs) with the greatest appreciation between the second quarters of 2006 and 2007 were Wenatchee, Washington (23.5 percent); Provo-Orem, Utah (18.2 percent); and Salt Lake City, Utah (16.0 percent.) Those faring the worst were all in California; Merced (-8.7 percent), Santa Barbara-Santa Maria-Goleta (-8.1 percent), and Stockton (-7.2 percent).

The report, as always, contains specific information not only on 287 "ranked" MSAs but on many smaller urban areas as well. To see how house prices in your vicinity may be doing, log on to