Washington, D.C. – U.S. house prices fell modestly in the fourth quarter of 2011 according to the Federal Housing Finance Agency’s (FHFA) seasonally adjusted purchase-only House Price Index (HPI). The HPI, calculated using home sales price information from Fannie Mae- and Freddie Mac-acquired mortgages, was 0.1 percent lower on a seasonally adjusted basis in the fourth quarter than in the third quarter. On an unadjusted basis, prices fell 1.1 percent during the quarter. Over the past year, seasonally adjusted prices fell 2.4 percent from the fourth quarter of 2010 to the fourth quarter of 2011.

FHFA’s seasonally adjusted monthly index for December was up 0.7 percent from its November value. On a not-seasonally adjusted basis, prices were flat over the November-to-December period.

"While FHFA’s national index shows a 2 percentage point price decline over the latest four quarters, 12 states and the District of Columbia posted price increases," said FHFA Principal Economist Andrew Leventis. "When coupled with the fact that about half of all U.S. states saw price increases in the latest quarter, this growth adds to mounting evidence that real estate markets are seeing at least some signs of life."

FHFA’s expanded-data house price index, a metric introduced in August that adds transactions information from county recorder offices and the Federal Housing Administration to the HPI data sample, fell 0.8 percent over the latest quarter. Over the latest four quarters, the index is down 2.9 percent. For individual states, price changes reflected in the expanded-data measure and the traditional purchase-only HPI are compared on pages 22–24.

While the national, purchase-only house price index fell 2.4 percent from the fourth quarter of 2010 to the fourth quarter of 2011, prices of other goods and services rose 4.0 percent over the same period. Accordingly, the inflation-adjusted price of homes fell approximately 6.2 percent over the latest year.

Significant Findings:

• The seasonally adjusted purchase-only HPI rose in the fourth quarter in 27 states and the District of Columbia.

• Of the nine Census Divisions, the West South Central Division experienced the strongest prices in the latest quarter, posting a 1.1 percent price increase. Prices were weakest in the Middle Atlantic Division, where prices fell 1.2 percent.

• As measured with purchase-only indexes for the 25 most populated metropolitan areas in the U.S., four-quarter price declines were greatest in the Chicago-Joliet-Napervile, IL area. That area saw price declines of 9.8 percent between the fourth quarters of 2010 and 2011. Prices held up best in Warren-Troy-Farmington Hills, MI, where prices rose 3.5 percent over that period.

The complete list of state appreciation rates is on pages 19–20. The list of metropolitan area appreciation rates computed in a purchase-only series is on page 33. Appreciation rates for the all-transactions metropolitan area indexes are on pages 34–50.

Highlights

This quarter’s Highlights article discusses recent revision patterns in the monthly HPI. Noting that first-time revisions in the estimated monthly rate of change have been persistently negative, the analysis evaluates whether the phenomenon may be related to distressed sales. Some evidence suggests that distressed sales, which usually occur at discounted prices relative to other transactions, may be entering the HPI estimation data sample with a greater lag than other transactions. Though not determinative, the analysis indicates the lag could at least partially account for the negative revisions.

Background

FHFA’s purchase-only and all-transactions HPI track average house price changes in repeat sales or refinancings on the same single-family properties. The purchase-only index is based on more than 6 million repeat sales transactions, while the all-transactions index includes more than 44 million repeat transactions. Both indexes are based on data obtained from Fannie Mae and Freddie Mac for mortgages originated over the past 37 years.

FHFA analyzes the combined mortgage records of Fannie Mae and Freddie Mac, which form the nation’s largest database of conventional, conforming mortgage transactions. The conforming loan limit for mortgages purchased since the beginning of 2006 has been $417,000. Pursuant to the terms of various short-term Congressional initiatives, loan limits for mortgages originated between July 1, 2007 and September 30, 2011 were as high as $729,750 in certain high-cost areas in the contiguous United States. Mortgages originated after September 30, 2011 were no longer subject to the terms of those initiatives and, under the formula established under the Housing and Economic Recovery Act of 2008, the "ceiling" limit for one-unit properties in the contiguous United States fell to $625,500.

This HPI report contains tables showing: 1) House price appreciation for the 50 states and Washington, D.C.; 2) House price appreciation by Census Division and for the U.S. as a whole 3) A ranking of 306 MSAs and Metropolitan Divisions by house price appreciation; and 4) A list of one-year and five-year house price appreciation rates for MSAs not ranked.

• Please e-mail FHFAinfo@FHFA.gov for a printed copy of the report.

• The next quarterly HPI report, which will include data for the first quarter of 2012, will be released May 23, 2012.

• The next monthly index, which will include data through Jan. 2012, will be released March 22, 2012.

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