OFHEO Data Shows House Prices Continue to Appreciate

The OFHEO house price index of repeat transactions shows continued gains in house prices. For the first quarter, it shows a national gain of +.5% QoQ (consensus +.3%), and revised higher the fourth quarter gain to +1.3% from, +1.1% QoQ. Over the last year, prices are up +4.3% YoY nationally. The increase is slightly lower, at +3% YoY, when only purchase only data is used, which is considered a better indication of real price gains than refinancings, which are subject to property assessors opinions.

Regionally there were some states that saw declines, but they were all less than 1%. Only two states have seen YoY declines - Massachusetts and Michigan at -.6% YoY each. In the quarterly data, areas of weakness include FL, WV, ME, CA, NV, MA, and MI. Regionally, the strongest quarterly price increases were in the Mountain and West South Central regions, each up +1.1% YoY. The weakest quarterly price gains were in New England, where they were unchanged QoQ. Looking at annual price gains, The mountain region is up +7.5% YoY, followed by East and West South Central at +6.6 and +6.8% YoY. Again New England was the laggard, gaining only +1.1% YoY. The Middle Atlantic has gained +4.2% YoY, and +.5% QoQ, based on the OFHEO data.

Interestingly, today's data show cash-out refis rising to a new high of 48.5% of all mortgages, up from 30-40% in 2003-04. At current house price levels, it is estimated that California it now requires about 70% of income for marginal buyer to cover their mortgage, this is up from 45% of income in 2003.

Over the last 30 years, the historical average of repeat home sales growth has been +6.2% annually. This compares to an average CPI gain over the same period of +4.4% YoY.

Many economists view the OFHEO data as some of the highest quality available because it involves repeat transactions and adjusts for a changing mix of existing homes sold across the entire country, and not just major metropolitan regions, such as Case-Shiller. The OFHEO index focuses on conforming mortgages, not jumbos.