U.S. Housing Prices Rise at Slowest Pace in a Decade -- OFHEO

Housing prices in the U.S. rose at their most sluggish pace in a decade during Q2, according to a report by the Office of Federal Housing Enterprise. Prices increased only 0.08% from the first quarter, the slowest since the end of 1994. The 3.2% increase in single-family homes was the smallest since 1997. Higher foreclosure rates have caused banks to raise standards for loan applicants, resulting in less potential buyers. The U.S. housing slump is the worst in at least 16 years. Home resales slumped to 5.75 million, the lowest number since 2002. Resales have gone down for five consecutive months. "The housing market is at a standstill right now because buyers are reluctant to go back into the market," noted Celia Chen, housing economist for Moody's Economy.com. "There's uncertainty whether the market will fall, so no one wants to buy." Chen sees home sales and construction to begin rising again in the middle of next year, but she added "home prices won't revive until 2009." But OFHEO director James Lockhart saw a positive side to the data: “House prices were basically flat in the second quarter despite tightening credit policies, rising foreclosure rates, and weakening buyer sentiment,” he said. “Significant price declines appear localized in areas with weak economies or where price increases were particularly dramatic during the housing boom.” The study only includes price information through June; to the extent that recent mortgage market instability may have affected housing demand and prices, those effects would be evident in OFHEO’s next HPI release, it said.

Sources: Press release (.pdf), Bloomberg, Reuters
Commentary: 'Subprime Chuck' Plays the Fool • U.S. Home Prices Show No Sign of Bottom • The Problem With 'Median Home Price' Data
Stocks/ETFs to watch: XHB, ITB

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Comments

[Ralph F:]

I don't understand this -- I thought that all the recent data showed that house prices were actually falling.

2007 Aug 30 03:08 PM

[Still Renting:]

I think of it like this: if something cost $1 a year ago today, $2 yesterday, but dropped a full 50 cents to be worth only $1.50 today, you could say it is "up 50%" even though it lost 25% of it's value in one day.

2007 Aug 31 11:09 AM

[Still Renting:]

Ha! ." But OFHEO director James Lockhart saw a positive side to the data: “House prices were basically flat in the second quarter despite tightening credit policies, rising foreclosure rates, and weakening buyer sentiment,” he said.

Yeah, that describes what, in a rocket's trajectory, is called the "apex". We all know what follows the apex.

2007 Aug 31 11:08 AM