Some Home Price Gauges Losing Credibility
Another day.
Another home price report.
Another acronym.
Or so it seems, the Palm Beach Post reports. Four major price reports have been released recently: the Office of Federal Housing Enterprise Oversight (OFHEO) House Price Index; existing-home sales reports from the Florida Association of Realtors (FAR) and the National Association of Realtors (NAR); and the S&P/Case-Shiller Composite Index.
Confusing, to say the least. The latter, which tracks 10 major cities, showed that home prices across the country grew at the slowest annual pace in more than nine years. The other three reports showed that single-family home prices are actually falling in many areas, including ours.
The NAR report rattled even diehard market bulls by recording the biggest year-over-year price decline on record. FAR’s report showed single-family home prices in Palm Beach County slipped 3 percent year over year, while Treasure Coast prices tumbled 8 percent.
Case-Shiller documented monthly price declines in seven of the 10 markets it covers - which don’t include PBC, by the way, so we generally don’t write about it. The Post tends to use reports that monitor local prices, such as those from FAR and OFHEO, to get a gauge of where Florida mortgage activity stands and estimate the future direction of home prices.
A growing number of analysts - including Thomas Lawler, principal of Lawler Economic & Housing Consulting in Vienna, Va. - are becoming disenchanted with the OFHEO index, however. The low estimation in which OFHEO is held can be attributed to what the index excludes as well as what it includes.
The OFHEO index excludes some important home sales for South Florida - luxury homes, for instance, as well as Florida home loans not securitized by Fannie Mae or Freddie Mac, which have limits of $417,000.
The index also underrepresents adjustable-rate mortgages, since Fannie’s and Freddie’s share of the ARM market is much lower than the national average. Once again, in South Florida, that’s lopping a lot of data off the top.
