The market is rising, but just barely.
The Office of Federal Housing Enterprise Oversight released their 2Q 2006 OFHEO House Price Index Report today [pdf]. I am not a big fan of this index, but its the best we’ve got.
U.S. home prices continued to rise in the second quarter of this year but the rate of increase fell sharply. Home prices were 10.06 percent higher in the second quarter of 2006 than they were one year earlier. Appreciation for the most recent quarter was 1.17 percent, or an annualized rate of 4.68 percent. The quarterly rate reflects a sharp decline of more than one percentage point from the previous quarter and is the lowest rate of appreciation since the fourth quarter of 1999. The decline in the quarterly rate over the past year is the sharpest since the beginning of OFHEO’s House Price Index (HPI) in 1975.
A 4.68% pace as compared to 10.06% in the prior year quarter.
In other words, on a national basis, the pace of home price appreciation is falling, but prices are not. Their headline OFHEO House Price Index Shows Largest Deceleration in Three Decades refers to the quarter over quarter comparison which I am not crazy about. Like last quarterer they seem to focus on sensational headlines, which is odd for a government agency. It does confirm what we have known for months: the housing market is not what it was last year.
Les Christie of CNN/Money covered the release today including my seemingly pessimistic quote:
Even so, according to Jonathan Miller of Miller Samuel, an appraiser in New York, “The index may not reflect what’s really happening out there.”
He believes that many sellers are holding out for unrealistically high asking prices, and the buyers actually purchasing homes are only the ones willing to pay the higher prices. “That’s why there’s been such a drop-off in volume,” says Miller.
We all know that national indicators don’t really gauge what is happening in local markets. What I meant by the quote was the idea that buyers who are paying, reflect their willingness to pay higher prices. The growing ranks of buyers that refuse to participate at this point, are not included (understandably) thereby painting a more optomistic view of what is really happening across the country.
When I was interviewed for this piece I also said its going to be an interesting “fall.” Realizing my lack of clarity, I quickly re-stated its going to be an interesting “autumn.”