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Pricing – what actually is happening?

Today’s Talking Point 11/25/09

The Federal Housing Finance Agency (FHFA) just came out with their 3rd Quarter Pricing Report (which covers the previous four quarters). If you go to the bottom of the home page, they have an interactive map where you can see how prices have changed in your state over the last year.

The Case Shiller report was also released this week. The headlines talk about prices rising. Let’s make sure we know the story behind the headlines:

The 10-City Composite is off 8.5% from September 2008.

The 20-City Composite is off 9.4% from September 2008.

The headlines report the month-over-month change in prices. Actually, prices have fallen almost 10% in the last year.

Here is a graph showing Case Shiller prices from Calculated Risk:

With the tax credit for homebuyers and the limited release of distressed properties by the banks, the lower priced inventory has been sold off. That is why there has been a slight increase in national prices on a month-to-month basis over the last several months.

Actual prices are NOT going up. Once the ‘shadow’ REO inventory is released, months supply will surge and prices will take another dip.

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