MERIC NEWS LETTER

Housing Price Index 2008 Q2

Not only has the U.S. housing crisis decreased property sales, home values have also For Sale Signbeen affected. The Housing Price Index (HPI) is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancing on the same properties. The HPI is derived from repeat mortgage transactions on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975.

According to this index, home prices in some regions of the U.S. have increased by over 400% since 1980. However, seven of the nine regions have seen a decline in home value in the second quarter of 2008 compared to the second quarter of 2007. There seems to be a correlation between the percent increase since 1980 and the percent changes seen more recently. The regions that had rapid HPI increases since 1980 are the same regions that currently see the decreases in home values. The regions that had a more stable long term HPI growth rate seem to be showing a smaller decrease or are still increasing.

Greater overall decreases in the HPI are likely to occur in 2008 Q3. States that were not major focal points of the housing bubble did not see home values drop at a drastic rate early on in the crisis. As the housing and subsequent credit crisis widened, however, state unemployment rates began to rise, broadening the economic impact. This lagging effect will likely lead to larger drops in the HPI during the third quarter.

Missouri and surrounding states have shown a trend of more stable long-term growth in housing prices. Since 1980 Missouri and Illinois are two of the three states that have had the greatest increase in HPI. The second quarter of 2008 compared to a year earlier shows Missouri with the smallest increase and Illinois with the only decrease compared to the surrounding states. 

Percent Change in OFHEO US Combined and Census Division
House Price Indexes

REGION Rank 2008 Q1 1 Year 5 Years Since 1980  
West South Central 1 0.62% 3.21% 28.12% 135.62%
East South Central 2 0.35 2.85 28.54 199.79
West North Central 3 -0.54 0.42 23.35 203.79
East North Central 4 -0.91 -0.3 16.94 216.34
Middle Atlantic 5 -1.12 -0.71 44.64 431.16
Mountain 6 -1.5 -1.25 47.73 278.81
New England 7 -1.79 -1.97 28.46 502.87
South Atlantic 8 -1.82 -2.95 46.42 307.92
Pacific 9 -4.9 -10.11 48.98 431.64
United States    -1.44 -1.71 34.84 280.82
STATE          
Oklahoma   1.28 4.93 26.52 113.24
Kentucky   0.62 3.06 22.31 197.43
Tennessee   0.31 2.66 30.28 215.58
Iowa   0.13 1.83 20.57 155.97
Nebraska   0.39 1.42 17.87 162.05
Kansas   0.03 1.26 20.2 149.49
Arkansas   0.32 1.04 29.1 163.08
Missouri   -0.3 0.89 25 205.48
Illinois   -0.83 -0.37 31.18 279.29

 

Housing Price Index USA Map

 

REGION HPI % Change       2006 Q2 to 2008 Q2
West South Central (WSC) 9.64%
East South Central (ESC) 8.8
Mountain (MT) 4.69
West North Central (WNC) 3.57
Middle Atlantic (MA) 2.39
East North Central (ENC) 1.36
South Atlantic (SA) 0.64
New England (NE) -1.9
Pacific (PAC) -8.44
United States  1.61
Missouri 4.65


Missouri, which belongs to the West North Central region, has had an HPI increase greater than the region average over the last two years. Home prices in all Missouri Metropolitan Statistical Areas increased from second quarter 2006 to second quarter 2008, but rural Missouri’s 7.72% increase was above the state and West North Central region averages, as well as that of most other regions.

 

Missouri Map of Housig Price Index 2008

 

Sources:Data taken or derived from the Office of Federal Housing Enterprise Oversight (OFHEO) website

 

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