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FHFA 3Q home-price index back down after increase in 2Q

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Home prices declined during the third quarter after rising slightly the previous quarter, which was the first quarterly increase in three years. The Federal Housing Finance Agency said its third quarter, purchase-only home price index — calculated using information from mortgages acquired by Fannie Mae and Freddie Mac — is 1.6% lower than the second quarter and 3.2% below a year earlier. U.S. home prices are down 8.4% over the past five years. Prices of other goods and services for the third quarter were 2% higher than a year earlier, which puts the third quarter, inflation-adjusted home price about 5.1% lower than last year, according to the FHFA. "The latest figures on the U.S. housing market are close to awful, with both prices and activity falling once again," according to Paul Dales, U.S. economist with Toronto-based Capital Economics, in a response to the new FHFA numbers. The quarterly decline in the FHFA index "more than reversed the second quarter's 0.7% rise to take prices to a new cycle low, some 14% below their 2006 peak." The expiration of the homebuyer tax credit in April continues to hinder sales. And while it's unlikely the nationwide foreclosure moratoriums affected new home sales, "it appears that it may have had an indirect effect on confidence," said Dales, who also believes the drop in new homes sales in September "is very worrying." New home sales are now only 3% above August's record low and are nearly 30% below the levels of a year ago. "We think that by the end of next year prices will be about 5% below current levels," he said. "That's unlikely to derail the economic recovery, but it will certainly hold it back." The FHFA said its home-price index has diverged from others such as those from CoreLogic, the National Association of Realtors and the Standard & Poor's/Case-Shiller index over the past few years because the agency only tracks the mortgages submitted to the government-sponsored entities. But the FHFA has begun including data from the county recorder it has licensed from DataQuick "to improve public understanding of price trends." The most-recent S&P/Case-Shiller index showed home prices rose 1.7% in August, but analyst expect prices to tumble 7% to 10% through 2011. CoreLogic's September home-price index showed a 2.8% decline. Write to Jason Philyaw.

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