Signs of Home Price Recovery Evident in More House Price Measures and Across More Markets
Based on a FHFA House Price Index (HPI) report released today, home prices across the country rose 1.8 percent in the second quarter from the quarter before and 3.0 percent from the second quarter of 2011. It was the largest price increase since Q4 of 2005. The FHFA HPI measures the change of home price on a same home so the measure is not affected by the mix of sales. The index is based on Fannie Mae and Freddie Mac mortgages. The CAR’s home price measure released last week showed a large jump in median home prices, however the increase is affected by larger share of more expensive homes being sold. The appreciation measured via FHFA HPI also reflects fewer distressed homes sold, but declining mortgage rates and low inventory of homes available for sale. Other significant findings suggest that the seasonally adjusted purchase-only HPI rose in the second quarter in 43 states.
This quarter report also looked at “distress-free” house price indexes for various metropolitan areas.
Table 1 reports the share of distressed transactions in the HPI data sample for California metropolitan areas (MSDAs) over the last six quarters. These shares reflect the proportion of GSE purchase-money mortgages that financed homes that were sold by a seller who was in financial distress or was a bank (or other third party buyer of a foreclosed home). Analysts have suggested that the share of distressed transactions drops in the spring as traditional sales hit their seasonal highs. However,
Table 1 shows that the share of distressed sale in the GSE sample generally fell between the first and second quarters in the last two years.
Table 2 reflects distress-free versus full sample price changes in several California metropolitan areas. The table compares price changes for the latest quarter, the last four quarters, and the last five years.
Undoubtedly, the share of distressed sales was and remains substantial in California markets and thus it is not surprising that distress-free house price indexes can differ significantly from the standard “full-sample” indexes. Consistent with the fact that the share of the distressed sales fell somewhat between the first and second quarters, the quarterly price changes for the distress-free indexes generally show smaller price increases than the standard purchase-only indexes. In essence, some of the price increases over the quarter are the result of the decline in the distressed sale share. For example, in Oakland, some of the price increase can be attributed to a significant drop in the share of distressed sales which fell by 12.5 percentage points between last two quarters.
Table 1
Table 2
Click here to get the full report from the Federal Housing Finance Agency
