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OFEHO: House Price Increases Continue; Some Deceleration Evident
Submitted by
CalculatedRisk on Thu, 06/01/2006 - 7:02am (29 comments)
The bay area is cooling off very quickly.
San Francisco-San Mateo-Redwood City, CA 1yr 14.60 Qtr 1.15
San Jose-Sunnyvale-Santa Clara, CA 1yr 15.65 Qtr -0.20
Oakland-Fremont-Hayward, CA 1yr 18.01 Qtr 1.15
Any idea why the big disparity from the -3.3% reported earlier (by the NAR?)?
ac, I'm not sure - probably different data sets and methodologies. Unfortunately NAR is very unhelpful (without paying them).
The OFHEO series will probably show price declines soon.
Best Wishes.
Interesting quote: "Changes in the mix of data from refinancings and house purchase transactions can affect HPI results. An index using only purchase price data indicates somewhat less price appreciation for U.S. houses..."
Don't have time to investigate further, but this makes me think they're using something besides purchase prices in their index. Not sure what to make of this. It might explain things though.
Irony is the non-bubble zones are getting hit harder than the bubble zones... the only two areas where Q-to-Q declines showed up statewide were in Iowa & S Dakota... but lotsa fly-over was close to negative.
This does NOT surprise me one bit... I think the 'story' that a bubble collapse will only effect a few areas is completely bogus. Even though many areas haven't appreciated that doesn't mean they can't drop. If in doubt ask Iowans about that.
OFHEO uses both sales and refinancings of homes for its index. Some think sales only are a more accurate gauge, because someone actually paid that price. Others say including refinancings adds a lot of real-time information. After all, mortgage companies don't just give money away for no reason.
dryfly, the OFHEO universe
is transactions using Freddie and Fannie conforming loans ... so this probably excludes many homes in the bubble areas.
This might be distorting the results. But I agree the housing slowdown will have a nationwide impact.
Best Wishes.
Appraisals can lag the general market by a quarter or two, so I'd be more inclined to trust the purchase-only index. Still, I think the OFHEO index is probably the best of the various housing price measures you see in the press, so "flattening but not falling prices" is still a better outcome than I expected to see.
Doesn't the chart on page 4 of the report show a decline when the refinancings are taken out?
itulip was predicitng rural areas get hit first as people infill back to the cities to avoid high gas prices - then suburbs and then urban....
Dear CR,
Your post suggests that according to your experience, the current housing slowdown, should show up as a sharper drop in OPHEO house appreciation index. Also, as you have recently posted, inventories have not yet reached the danger zone but are closer.
Do you expect a steeper drop if inventories continue to rise above 6 months supply level?
I'm just too stubborn to see itulip's scenario (donna's?) unfold. That is, I am unable to see high gas prices force people back to the city cores. No, the oil prices will fall in response to affordability issues: the high houses prices being stickier than the fuel prices in my opinion. [Really, I should get robust about this and argue persuasively from the stake-holder point of view, etc but I am horribly pushy today.]
So consumers will lighten up on retail and driving (!!!) as their purse shrinks. Fuel prices decline as a result, but housing continues to fade as the number of first time buyers fail to cross the affordability threshold.
IM, I thought we would see a sharper drop in the House Price Index because the NAR reported a price drop in Q1 and also from anecdotal stories. I have to remember that everything about housing seems to move slower than I expect!
My expectations (I've written several times) is for housing prices to deflate slowly over several years - similar to the early '90s bust in California. This bust will probably be more widespread and could see sharper drops (because of all the exotic loans), but in general housing prices are still sticky.
Areas with 6+ months of supply (like Sacramento and Boston) saw prices flatten or even fall in Q1. I'd expect that pattern to repeat in other areas as inventories rise.
Best Wishes.
This price index includes ONLY single family residences priced less than $417,000. I am in the San Fernando Valley where in the last 12 months we have had exactly 7 (yes, that is SEVEN) homes sell that met this criteria. This is out of over 18,000 sales, in an area with a population of over 3 million. I seriously doubt if these 7 homes even met FNMA FRE lending guidelines, not to mention the remote chance that they would be involved in a repeat sale. Wouldn't any statistician deem this index completely meaningless and fatally flawed? Why even compute and publish it?
Thank you deb and now you should go over to Kash's thread at Angry Bear and let him know.
deb, I tried to make that point above: "the OFHEO universe is transactions using Freddie and Fannie conforming loans ... so this probably excludes many homes in the bubble areas."
I think you made the point even more starkly. Only 7 homes? ROFLOL.
Best Wishes.
I believe the price index would include sales for which the amount of the loan purchased by fannie mae or freddie mac would be under 417K. Most likely this amount represents 80% of the home value. The other 20% being a downpayment or a piggyback loan.
So typically that would include sales below 521K. Also I'm sure a bunch of move up buyers who sold their own didn't need to borrow more than 417K.
Under those circumstances, I suspect the HPI covers more than 7 transactions in the sfv.
Funny...and b.s. A zip realty search of a single zip code in
Chatsworth yields 5 sales in the last 60 days alone below 417k.
Great point, jl, I forgot about the down payment. But, I would seriously doubt that the buyers of these few homes are bringing $100k to closing. 5% at the most is probably more like it. It would still probably only be a couple hundred homes, and again the question of whether or not they meet FNMA FRE lending guidelines, and have had a repeat sale.
Still a pretty meaningless stat in the scheme of things.
Remeber, no PUDs, no condos, etc. Single family only.
Show your source.
Without spending too much time on this whole thing... I am using the SRAR MLS system (for agents only). When I run a search for final sales, single family, under $438k, for the last 12 months, I get about 250 results. I would have to go through them one by one, because many will actually turn out to be PUDs or condos because the agents don't enter the data properly. So suffice to say that there are about 200-225 sales that might meet the price criteria. Many of which will not meet FNMA/FRE guidelines, and most of which are not going to be a repeat sale.
This is out of 18,000(!!!) sales in the last year. The index just doesn't tell us anything about what's going on in the California market. That's my only point.
I used $438K to allow for a 5% downpayment.
That's what I thought, you can't do it, and even your sad attempt exposes your "exactly 7 (yes that is SEVEN) homes" statement as b.s.
Martin, deb is a serial bubblehead blog pisser on Ben's, where any attempt, no matter how sad, constitutes unimpeachable proof. Evidently here with CR as well. As for you, well, you must be new here.
Who TF:
Nice ad hominem attack.
Check out the big brain on Who.
Grow up.
Gee, I thought I explained myself fairly clearly. If you'd like to join the mls, you could plug in the search and run it for yourself. I do post occasionally on Ben's blog (but haven't much in months). Glad you remember me! I'll take it as a compliment.
I thought I had something to share. And I think my point still stands, that this index uses data that in no way represents the market as a whole, whether it's 7 sales or 200 out of 18,000.
In my haste, I did forget to account for a downpayment. Sorry about that.
Dr. Who and Martin, you guys are terribly bitter. Must be tough to be so unhappy all the time. I thought I was just having a conversation, not a spitting match.
Thanks sunsetbeachguy.
Looks like it stings to be exposed pulling specific numbers out your ass to support a point.
OUCH!!
DR Who's a hit-and-run housing booster (probably a RE agent or similar).
He almost never posts more than once in a thread and it's always a bitter, snarky comment. Loves ad hominem attacks.