Thursday, May 22, 2008

OFHEO's House Price Index Shows 3.1 Percent National Decline In One Year; Alaska House Price Indices Comparatively Stable

The Office of Federal Housing Enterprise Oversight (OFHEO) says home prices fell 3.1 percent in the first quarter of 2008 compared with the first quarter 2007. The House Price Index (HPI) also fell 1.7 percent from fourth quarter 2007 to the first quarter of 2008, representing the largest quarterly price drop in the 17-year history of the report. National media stories published by USA Today, the Associated Press, and HousingWire also offers a useful analysis for the hard-core financial wonk. No Alaska media stories yet published as of this post.

The primary source of information is the 82-page report in PDF format published by the OFHEO. This includes statistics for census divisions, states, metropolitan statistical areas (MSAs), and unranked smaller cities, as well as a wealth of graphs, charts, and associated verbiage. Those who want to view only the statistics can click HERE to view state statistics, or HERE to view MSA (metro area) statistics. States and MSAs are rated by annual house price changes, with the highest increases first.

National Highlights:

- Prices fell in the first quarter in 43 states. Eight states had quarterly price declines of more than 3% and two — California and Nevada — saw prices decline more than 8%.

- States with the greatest price appreciation between first quarter 2007 and first quarter 2008 were: Wyoming (6.3%), Utah (5.6%), Montana (4.9%), Texas (4.7%), and Alabama (4.5%).

- States with the sharpest depreciation for the same period were: California (-10.6%), Nevada (-10.3%), Florida (-8.1%), Arizona (-5.5%), and Michigan (-3.1%). Note that four of these states (except Michigan) have the maximum degree of population mobility, transiency, and diversity. These four states have also been primary targets of illegal immigrants.

"The large overhang of real estate inventory awaiting sale continues to force price declines in many areas, but particularly in places that had seen very sharp appreciation," OFHEO chief economist Patrick Lawler explained.

Alaska Highlights:

- Alaska is rated 32 out of the 50 states, based upon a one-year price increase of only 1.34 percent. In the first quarter of 2008 alone, prices dropped an average of 0.31 percent. However, the five year average shows an average price increase of 49.07 percent during that period. Since 1980, average home prices have increased 183.87 percent; this number may appear smaller than expected, but it also reflects the sharp downturn and the resultant housing glut that appeared in Anchorage during the late 1980s.

- Anchorage is rated 170 out of the 292 listed MSAs, based upon a one-year price increase of only 0.74 percent. In the first quarter of 2008 alone, prices dropped an average of 0.22 percent. However, the five year average shows an average price increase of 49.94 percent during that period. Comparison of the Anchorage numbers with the overall Alaska numbers shows that Anchorage's housing market is more stable than the overall Alaska market, which in itself is considerably less volatile than many other states.

- Fairbanks is included in a list of smaller cities published on page 41 of the master report. These cities are not grouped in rank order array. Fairbanks' average one-year price increase was 2.12 percent and their five year average shows an average price increase of 46.79 percent during that period.

Methodology: The government index is calculated by tracking mortgage loans of $417,000 or less that are bought or backed by the government-sponsored mortgage-finance companies Fannie Mae and Freddie Mac. This means higher-priced "luxury" homes are not factored into the overall data. Legislation enacted in February 2008 temporarily raised the limit to as much as $729,750 in high-cost areas. One other significant limitation is that the index considers only single-family detached homes with conforming conventional mortgages; this means condos are excluded. More about the methodology HERE.

For a broader picture of Alaska's housing market, compare the information presented in this post with information on NAHB's Housing Opportunity Index, which initializes home prices against family income, in this previous post.

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