OFHEO Finds Surprising Home Price Jump in February

Conforming home prices appear to have taken a surprising jump in February, according to data released Tuesday morning by the Office of Federal Housing Enterprise Oversight. An index of purchase-only transactions rose roughly 0.6 percent on a seasonally-adjusted basis in February, the agency said in a press statement, after posting a revised 1.0 percent decline in January. The report clearly bested most economists’ expectations, with most predicting a 1.5 percent monthly decline ahead of the report.

Year-over-year, conforming home prices are still off 2.4 percent; since a peak in April 2007, home prices have fallen 3.1 percent, OFHEO said.

The apparent rise in conforming prices caught more than a few industry participants off guard, and had some wondering if a data quirk might explain the month-to-month rise. Other February price data, including data released Tuesday by First American CoreLogic, suggests that prices continued to head downward nationally during the month.

The OFHEO data is less likely to show severe price downturns because it tracks only the conforming housing market; price corrections during times of market stress are historically more severe in the jumbo lending market.

“There has to be something in the data, or how its collected,” said one source, who asked not to be identified. “Prices did most certainly not go up in California during February.”

The OFHEO monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac, and does not include refinance transactions that might upwardly distort pricing information.

“It’s important to keep in mind that this is the only part of the market that’s moving right now,” said one source, an MBS analyst. “While it’s certainly possible prices increased in general, it’s also possible that many would-be jumbo buyers, unable to get financing, finally caved and bought at the higher-end of the conforming limit.”

One thing that would appear to be clear is that prices were not distorted by the use of so-called jumbo conforming loans, which were added to the GSEs repertoire in February. While both Fannie and Freddie are temporarily authorized to purchase loans up to $729,500 in certain high-cost markets, most sources have made it clear that so called “jumbo-lites” have yet to really move onto either GSE’s books at a meaningful rate.

For its part, OFHEO said that the rise in prices was due in part to a change in the geographic mix — while such changes are usually small, OFHEO said that during February, states with stronger housing markets rebounded strongly, significantly shifting the national mix in their favor. Had the weights for each state been held constant, the national increase would have been only 0.3 percent in February, the agency said.

For the nine Census divisions tracked via the OFHEO HPI, seasonally-adjusted monthly price changes from January to February ranged from -0.6 percent in the Mountain Census Division to 2.2 percent in the New England Division.

Perhaps the most surprising statistic, however, was a 0.3 percent gain recorded for the month in the hard-hit Pacific region, which includes California and Nevada — a gain that homeowners in the state didn’t seem to feel.

“If prices went up here in February, nobody here felt it,” said one homeowner in Southern California’s Huntington Beach.