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New FHFA House Price Data – A Mixed Bag

This morning, the Federal Housing Finance Agency (FHFA) released house price data for the second quarter of 2012.  For Arkansas, the report was a mixed bag of results.  The seasonally-adjusted “Purchase-Only Index” (which uses only sales price data) showed Arkansas house prices up 1.9% for the quarter and up 7.2% from a year earlier.  In comparison, data for the U.S. showed prices up 1.8% for the quarter and up 3.0% from the previous year.  On the other hand, the FHFA’s “All-Transactions Index” (which includes appraisal data from refinancings) showed prices declining.  House prices were down 1.5% in Arkansas, and down 0.7% nationwide.

Source: Federal Housing Finance Agency
Source: Federal Housing Finance Agency

The purchase-only index has the advantage of measuring only market transactions — where true value is revealed.  The all-transactions index has broader coverage and incorporates more individual data observations.  But neither is a perfect measure.  One conclusion on which both methodologies agree:  The house-price crash that has plagued the market since 2006 has not been nearly as severe in Arkansas as in the rest of the nation.

One drawback of both measures is the limited nature of the underlying data, which are restricted to mortgages financed by Fannie Mae and Freddie Mac.  Missing in this sample are transactions for homes financed with nonconforming mortgages, including “jumbo” loans.  In an attempt to broaden coverage, the FHFA introduced a third measure last year, the “Expanded-Data” indexes, which incorporate additional data from the FHA and from county recorder offices.  The Expanded-Data indexes help to bring the FHFA measures into closer correponsdence with the famous Case-Shiller house price index.

As shown in the chart below, the expanded data indexes show larger peak-to-trough declines than either the all-transactions or purchase-only measures, but tend to validate the view that we are past the trough with prices beginning to recover.  For the second quarter, the expanded-data series show Arkansas prices up 2.4% and U.S. prices up 2.0%.  On a year-over-year basis, the Expanded-Data series show prices up 7.8% in Arkansas and up 2.4% for the U.S.

Source: Federal Housing Finance Agency

Metro Area House Price Data:
Metro area data are available only for the All-Transactions measure.  Consistent with the statewide reading for the second quarter, house prices as measured by this methodology were down across the state.  Price declines ranged from -0.4% in Little Rock and Fort Smith to -5.4% in Hot Springs.  Relative to the second quarter of 2011, however, house prices were measured as being higher in three metro areas — Fayetteville, Jonesboro and Little Rock.  The longer-run record of house prices shows considerable diversity among the states metro areas.  Compared to the second quarter of 2007, price changes range from +6.2% in Texarkana to -18.6% in Fayetteville.

Source: Federal Housing Finance Agency