America may well be only halfway through the house-price bust; so says this week’s Economist:
Mr Bernanke’s maps use figures from the Office of Federal Housing Enterprise Oversight (OFHEO). Its statistics have broad geographic reach and track repeat sales of the same house. The monthly national index suggests average prices have fallen only 3% from a peak in April 2007, and the quarterly figures are still positive (see left-hand chart).
But OFHEO’s figures include only houses financed by mortgages backed by the government-sponsored giants, Fannie Mae and Freddie Mac. By excluding subprime and jumbo loans, they leave out the top and bottom of the market—where prices rose fastest during the bubble and where the mortgage mess was most severe.
Thus OFHEO’s figures probably understate the scale of the housing mess, particularly in states such as California and Florida. Another set of indices, developed by Robert Shiller and Karl Case and produced by Standard & Poor’s (S&P), a rating agency, includes all types of houses and, not surprisingly, show house prices rising faster during the boom and falling faster now. As of the fourth quarter of 2007, the S&P/Case-Shiller national index was down 10% from its peak, and an index of ten large cities had fallen by almost 16% by February. Although the Case-Shiller figures are not perfect—they miss many rural areas—they are a better gauge of price declines in big cities.
Note: As mentioned earlier this week, Fannie Mae data is ex-foreclosure, also.
The graphs say it all:
Changes in House Price by County
Map of misery
The Economist, May 8th 2008