The Search for the Housing Bubble Hits a Snag in the Latest OFHEO Report

Update: SEE Editor's Note at bottom of post for related MRC content.

1Q07 Home Prices Up 0.5%, 4.3% Over 12 Months Ago

Those looking for a pervasive and severe nationwide decline in home prices are going to have to keep looking.

The Office of Federal Housing Enterprise Oversight (OFHEO) just released its House Price Index (PDF) for the first quarter of 2007. This most comprehensive of home-price reports shows that nationwide prices increased 0.45% (rounded to 0.5% in the announcement) in the first quarter of this year, and went up 4.25% (rounded to 4.3% in the announcement) in the past four quarters.

Core inflation during those two time periods was 0.6% and 2.5%, respectively. OFHEO says that inflation excluding only shelter costs only rose 1.6% during the past year.

Context (from Pages 4 and 5 of the report):

  • From 1990 through 1997, reported four-quarter appreciation was less than the 4.25% just reported 28 out of 32 times.
  • During that same time period, individual-quarter appreciation was less than the 0.45% just reported 14 out of 32 times -- including six nationwide quarterly declines.

I recall no discussions of pervasive real estate "bubbles" or fears of steep, widespread declines during the 1990s.

Here's what will likely be a well-kept secret: Seven western states actually showed double-digit gains in the past 12 months (UT, ID, MT, WY, WA, NM, and OR), and 12 others had increases of over 6%.

Only seven states came in with four-quarter results below OFHEO's 1.6% inflation minus shelter costs figure (from Page 19 -- RI, CA, NH, OH, NV, MA, and MI). All are understandable without having to call out a price-collapse scenario. Cali and Nevada overheated more than most states in the three previous years, while the other states' economies aren't doing very well. Only MA (-0.56%) and MI (-0.86%) actually had year-over-year declines.

Looking at regions (Page 28), eight of nine came in above the 1.6% benchmark just noted; only New England (+1.11%) trailed.

As to metro areas, the search for widespread suffering was also futile. In contrast to the S&P report (Excel spreadsheet is at 5th item at bottom of linked page) that showed 13 and 17 of the 20 largest metro areas with annual and quarterly declines, respectively, OFHEO showed only three annual declines (overheated San Diego, plus declining Detroit and Boston) and 10 quarterly declines. San Diego (-1.12%) was the only top-20 metro area to show a quarterly decline of over 1%.

Apparent doomsday believer Rex Nutting of MarketWatch jumped on the S&P report (requires free registration), and appeared eager to tell us that, according to the relatively limited S&P report, "Prices have been falling for the past three quarters."

Well, not exactly, Rex. Let's see how Nutting treats the OFHEO release, whose now-accurate prediction of 0.5% made by an economist was saved for the last paragraph of his report.

The Associated Press, in an unbylined report at 11:36AM, searched for a way to go negative on the OFHEO release, and settled on the idea that it "provided the latest indication of a modulated slowdown in the once-sizzling housing market."

Cross-posted at

Update/Editor's Note (Ken Shepherd | 17:23 EDT): In Nov. 2005, NewsBusters contributor Noel Sheppard wrote a study for the MRC's Business & Media Institute that dealt with the media's ongoing fascination with and anticipation of a "housing bubble" burst.

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