House Price Index Falls 0.8 Percent in Fourth Quarter 2010; House Prices Decline in Most States

U.S. house prices fell in the fourth quarter of 2010 according to the Federal Housing Finance Agency’s (FHFA) seasonally adjusted purchase-only house price index (HPI). The HPI, calculated using home sales price information from Fannie Mae- and Freddie Mac-acquired mortgages, was 0.8 percent lower on a seasonally adjusted basis in the fourth quarter than in the third quarter of 2010. The unadjusted national decline was 2.2 percent. Over the past year, seasonally adjusted prices fell 3.9 percent from the fourth quarter of 2009 to the fourth quarter of 2010.

South Carolina fell faster than the nation over the last year, at 6.12 percent, but rose 0.06 percent over the fourth quarter.

The news was better for Greenville, where prices fell just 1.58 percent over the last year and rose 0.05 percent during the last quarter.

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FHFA’s seasonally adjusted monthly index for December was down 0.3 percent from its November value. The monthly increase for the October-to-November period was revised downward from an initial estimate of 0.0 percent to -0.3 percent.

“Lingering unemployment and elevated inventories of for-sale homes contributed to the ongoing decline of house prices,” said FHFA Acting Director Edward J. DeMarco.

While the national, purchase-only house price index fell 3.9 percent from the fourth quarter of 2009 to the fourth quarter of 2010, prices of other goods and services rose 1.8 percent over the same period. Accordingly, the inflation-adjusted price of homes fell approximately 5.7 percent over the latest year.

FHFA’s all-transactions house price index, which includes data from mortgages used for both home purchases and refinancings, decreased 0.8 percent in the latest quarter and is down 1.3 percent over the four-quarter period.

Significant Findings:
The seasonally adjusted purchase-only HPI declined in the fourth quarter in 35 states plus the District of Columbia. Prices rose in the latest quarter in 15 states.
Of the nine Census Divisions, the East North Central Division and the Mountain Division experienced the most significant price movements in the latest quarter. While prices rose 0.1 percent in New England, prices fell 2.2 percent in the Mountain Division.
As measured with purchase-only indexes for the 25 most populated metropolitan areas in the U.S., four-quarter price declines were greatest in the Phoenix-Mesa-Glendale, AZ area. That area saw price declines of 15.3 percent between the fourth quarters of 2009 and 2010.
Prices held up best in the Denver-Aurora-Broomfield, CO area, where prices rose 3.7 percent over that period.

The complete list of state appreciation rates are on pages 15 and 16 of the report.

The complete list of metropolitan area appreciation rates computed in a purchase-only
series are on page 27 and all-transactions indexes are on pages 30-44 of the report.

Highlights
This quarter’s Highlights article examines whether properties that are frequently bought and sold have a different house price appreciation path than properties that are not frequently bought and sold. Using purchase-only data from California and the South Atlantic Census Division, the analysis shows that the two types of properties have very similar appreciation paths. Further, eliminating frequently transacting properties from the sample does not appreciably change the estimated price indexes for either area.

Background
FHFA’s purchase-only and all-transactions HPI track average house price changes in repeat sales or refinancings on the same single-family properties. The purchase-only index is based on more than 6 million repeat sales transactions, while the all-transactions index includes more than 42 million repeat transactions. Both indexes are based on data obtained from Fannie Mae and Freddie Mac for mortgages originated over the past 36 years.

FHFA analyzes the combined mortgage records of Fannie Mae and Freddie Mac, which form the nation’s largest database of conventional, conforming mortgage transactions. The conforming loan limit for mortgages purchased since the beginning of 2006 has been $417,000. Loan limits for mortgages originated in the latter half of 2007 through Dec. 31, 2008 were raised to as much as $729,750 in high-cost areas in the contiguous United States. Legislation generally extended those limits for 2009-originated mortgages. An appropriations act (PL111-88) further extended those limits for 2010 originations in places where the limits were higher than those that would have been calculated under pre-existing rules.

This HPI report contains tables showing: 1) House price appreciation for the 50 states and Washington, D.C.; 2) House price appreciation by Census Division and for the U.S. as a whole; 3) A ranking of 309 MSAs and Metropolitan Divisions by house price appreciation; and 4) A list of one-year and five-year house price appreciation rates for MSAs not ranked.