Complain about a product or service

Federal Home Price Index Drops at Record Pace

Biggest quarterly drop since record-keeping began

May 22, 2008

The Office of Federal Housing Enterprise Oversight said home prices dropped 3.1 percent in the first quarter compared with last year, the sharpest decline in the index's 17-year history.

The index, which is based on data from home sales, was 1.7 percent lower on a seasonally-adjusted basis in the first quarter than in the fourth quarter of 2007. This decline exceeded the 1.4 percent price decline between the third and fourth quarters of 2007 and is the largest quarterly price decline on record.

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 fell 0.2 percent in the latest quarter and was flat over the four-quarter period.

"These substantial home price declines bring positive and negative news," said OFHEO Director James B. Lockhart. "For homeowners and financial market observers, these declines spell further erosion in home equity levels and potentially more trouble for mortgage markets."

But Lockhart noted that the news is not so bad if you happen to be a prospective home buyer who has been shut out of homeownership because of affordability constraints. As long as mortgage rates remain low, he says, these declines may actually be welcome news.

Both OFHEO's purchase-only index and its all-transactions index show much more muted price declines than do other house price indexes.

"While house price declines are widespread, homes financed with prime, conforming mortgages continue to hold up better than those financed with other types of mortgages, a phenomenon we've been observing for the last several quarters," Lockhart said.

According to the index, prices fell in 43 states, with California and Nevada showing the largest declines. Home prices down by more than 8 percent in both states.

NAR

The federal statistics echo private reports, like those compiled by the National Association of Realtors, which earlier this month noted the median price for a single-family home fell 7.7 percent in the first three months of 2008.

It's the biggest decline in nearly three decades. The median home price fell to $196,300, down from $212,600 a year ago. Home sales, including condos, were down 22 percent year over year.

Putting the best possible spin on the grim numbers, NAR noted that median home prices actually went up in 48 out of the 149 metro areas in the survey. But those 48 metros tend to be smaller cities, where home prices had not appreciated as much.

One hundred metros recorded price declines while one was unchanged. Lawrence Yun, NAR chief economist, said the numbers don't tell the whole story.

"These are highly unusual results because there were very few jumbo loan originations in the latest quarter, so sales are much slower in high-cost areas, and at the same time foreclosures related to subprime mortgages rose," Yun said.

"Neighborhoods with little subprime exposure are holding on very well, while prices have fallen in neighborhoods with a wide prevalence of subprime loans because more foreclosed properties are being sold at discounted prices," he said.

Yun pointed out that homeowners with subprime loans account for less than 10 percent of all homeowners. Even so, subprime mortgages account for more than half of all foreclosures. Sharp price declines are principally in neighborhoods where subprime lending has been widely prevalent, he said.

In the first quarter, the largest single-family home price increase was the Binghamton, N.Y., area, where the median price of $109,700 rose 11.8 percent from a year ago. Next was Peoria, Ill., at $119,000, up 10.4 percent from the first quarter of 2007, followed by the Spartanburg, S.C., area, where the first-quarter median price increased 10.1 percent to $130,300.

Median first-quarter metro area single-family home prices ranged from $65,400 in the Saginaw-Saginaw Township North area of Michigan, to nearly 12 times that amount in the San Jose-Sunnyvale-Santa Clara area of California, where the median price was $780,000. The second most expensive area was San Francisco-Oakland-Fremont, at $701,700, followed by Honolulu at $620,000.

Other affordable markets include the Youngstown-Warren-Boardman area of Ohio and Pennsylvania at $67,700, and Decatur, Ill., with a first-quarter median price of $79,400.

Condo prices

In the condo sector, metro area condominium and cooperative prices – covering changes in 55 metro areas – showed the national median existing-condo price was $216,900 in the first quarter, down 3.0 percent from $223,700 in the first quarter of 2007. Twenty-three metros showed annual increases in the median condo price, 31 areas had price declines and one was unchanged.

The strongest condo price increases were in Bismarck, N.D., where the first quarter price of $124,900 rose 36.4 percent from a year earlier, followed by the New Orleans-Metairie-Kenner area of Louisiana, at $170,500, up 15.3 percent, and Wichita, Kan., where the median condo price of $106,600 rose 11.7 percent from the first quarter of 2007.

Metro area median existing-condo prices in the first quarter ranged from $106,600 in Wichita to $546,700 in the San Francisco-Oakland-Fremont area. The second most expensive condo market reported was Los Angeles-Long Beach-Santa Ana, at $343,700, followed by the New York-Wayne-White Plains, area of New York and New Jersey at $333,800.

Other affordable condo markets include the Indianapolis area at $110,000 in the first quarter, and Syracuse, N.Y., at $111,100.

Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate2 of 4.95 million units in the first quarter, down 0.9 percent from an upwardly revised 5.00 million in the fourth quarter, and are 22.2 percent below a 6.36 million-unit pace in the first quarter of 2007.

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to 5.88 percent in the first quarter from 6.23 percent in the fourth quarter; the rate was 6.22 percent in the first quarter of 2007.

Single-family homes

Regionally, the median existing single-family home price in the Northeast rose 3.2 percent to $280,000 in the first quarter from the same period in 2007. After Binghamton, the strongest price increase in the Northeast was in Elmira, N.Y., at $82,500, up 9.6 percent from the first quarter of 2007, followed by Glens Falls, N.Y., with a median price of $163,100, up 7.7 percent.

In the South, the median existing single-family home price was $164,200 in the first quarter, down 7.5 percent from a year earlier. After Spartanburg, the strongest price increases in the South were three areas in Texas: El Paso, at $134,600, up 8.5 percent from a year ago, followed by the Amarillo area with an 8.2 percent gain to $122,200, and Beaumont-Port Arthur, at $122,900, up 6.1 percent.

The median existing single-family home price in the Midwest declined 7.9 percent to $142,700 in the first quarter from the same period in 2007. After Peoria, the strongest metro price increases in the Midwest were in the Decatur area, where the median price of $79,400 was 4.2 percent higher than a year ago, and Springfield, Ill., at $172,200, also up 4.2 percent. Next was the Wichita, Kansas, area, at $112,700, up 4.0 percent from the first quarter of 2007.

In the West, the median existing single-family home price was $296,300 in the first quarter, which is 12.3 percent below a year ago.

"This is the area hardest hit by the slowdown in jumbo mortgage loan origination, which is just now starting to improve," Yun noted.

The strongest metro price increase in the West was in the Yakima, Wash., area, at $148,400, up 9.0 percent from a year ago, followed by Farmington, N.M., at $190,000, up 6.3 percent, and the Salt Lake City area, at $225,700, up 3.5 percent from the first quarter of 2007.

Report Your Experience
If you've had a bad experience -- or a good one -- with a consumer product or service, we'd like to hear about it. All complaints are reviewed by class action attorneys and are considered for publication on our site. Knowledge is power! Help spread the word. File your consumer report now.

Back to the top |