Nationally House Prices Edge Down, But Some States Show Improvement


House prices turned down in the third quarter according to the Federal Housing Finance Agency (FHFA) with the release of their monthly purchase-only house price index (HPI).  The FHFA HPI indicated that nationally house prices fell 1.6% to 190.5 (seasonally adjusted) in the September quarter, following a 0.7% increase in the second quarter.  On a month-over-month basis, the HPI fell 0.7% in September, and the slight increase (0.4%) recorded in August was revised down to show no change (0.0%). 

Quarter-over-quarter, a decrease in the HPI was observed in eight divisions, with West South Central (up 0.38%) the only exception.  The largest declines were observed in the Mountain (-7.9%) and South Atlantic (-6.5%) divisions.  Year-over-year, the HPI was down by 3.4%, with declines observed in seven divisions – again with the largest declines in the Mountain (-8.5%) and South Atlantic (-7.2%) and divisions. These divisions are dominated by states experiencing the weakest economic conditions and most affected by the housing market downturn (Nevada, Arizona and Florida).

The HPI varies widely across the states, with prices rising in 13 states on a quarter-over-quarter basis and 10 states on a year-over-year basis.  The largest year-over-year increases were observed in the District of Columbia (+5.3%), West Virginia (+4.4%), Alaska (+4.2%), North Dakota (+3.9%), Louisiana (+1.7%) and Texas (+1.1%).  Arizona (-9.3%), Nevada (-6.7%) and Florida (-6.5%) were included in the states with the largest declines, as were Idaho (-9.3%), Georgia (-9.5%), Oregon (-8.1%), and South Carolina (-7.7%).

Some volatility in house prices was expected in the third quarter due to the weak housing demand observed following the expiration of the homebuyer tax credit. However, with housing demand expected to improve over the remainder of 2010 and build momentum over the next two years, we expect house prices to stabilize in the December quarter of 2010 and begin to show modest positive growth in 2011 that will continue through 2012.

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