Sharpest home price pull back since 1975
OFHEO's house price index shows the largest quarter-to-quarter fall off in home price increases in three decades of record keeping.
By Les Christie, CNNMoney.com staff writer
September 5 2006: 10:16 AM EDT
NEW YORK (CNNMoney.com) -- New evidence of a housing market slowdown emerged today with the release of the latest housing price index from the Office of Federal Housing Enterprise Oversight (OFHEO).
The year-over-year price gain of the median single family home came to a healthy 10.6 percent, but the quarter to quarter appreciation was just 1.17 percent, a decline of more than one percentage point from the previous quarter.
That represents the sharpest quarter to quarter pullback since OFHEO began the index back in 1975 and the lowest rate of appreciation since the fourth quarter of 1999.
OFHEO's numbers are generally regarded as the most accurate gauge of market direction. Instead of measuring the average sale prices of homes it compares repeat sale prices of the same single family homes.
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.
To close deals with the on-the-fence or reluctant buyers, sellers will have to drop their prices and the index will only then reflect that. The effect could snowball if sellers get a bit panicky and try to sell their properties before prices erode further.
All markets are local
Real estate markets are, however, extremely local and what's true in Indiana may not hold in New Jersey. Some markets have remained, if not red-hot, at least simmering.
In Arizona, which recorded the highest year-over-year increase in median prices, the average home sold for 24.05 percent more than 12 months ago. Florida price rose 21.28 percent, a comedown after years of much higher double digit increases.
Michigan prices, on the other hand, only rose 1.01 percent, a loss in inflation-adjusted dollars. Its quarter-to-quarter prices fell 0.72 percent. Other losers include Massachusetts (down 0.44 percent for the quarter percent ) and Maine (down 0.20 percent).
The number one gainer among metro areas was Bend, Oregon, where the median price rose 36.65 percent in the 12 month period percent and 7.37 percent for the quarter.
The biggest fall was endured by Ann Arbor, Michigan. Prices declined 1.28 percent there year-over-year and 1.00 percent for the quarter.
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