Home Purchase Prices Fall At Record Pace; Refis Tell Another Story
U.S. home prices fell in the first quarter of 2008 -- and at a record pace, too, if you look only at purchases and exclude refinancing activity. The Office of Federal Housing Enterprise and Oversight said Thursday morning that its seasonally-adjusted first quarter index for purchases dropped 1.7 percent from the fourth quarter of 2007, the steepest quarterly decline in the purchase-only index's 17-year history. Annually, purchase prices have fallen 3.1 percent between Q1 2007 and Q1 2008, OFHEO said -- also the largest annual price decline on record. Refinancing activity remains problematic Those sharp price decline numbers contrast with an all-transactions index, however, which adds in refinancing activity. OFHEO reported that its all-transactions house price index fell just 0.2 percent on a quarterly basis, and was actually flat on an annual comparison basis. It's not immediately clear why refinancing transactions would so strongly moderate price declines in the purchase only index. Sources that spoke with Housing Wire Thursday said that one reason may be that borrowers in neighborhoods less affected by the housing slump would be likely more able to refinance; others suggested that the pressure to hit target values could lead to inflated home prices in refinancing transactions. Housing Wire has asked OFHEO for comment on the divergence between refinancing and purchase prices in the past; the agency has yet to issue a formal comment on the matter. OFHEO researchers did note, however, that refinancing activity has been a "important factor that has affected" the overall HPI in recent quarters. Approximately 82.3 percent of all transactions in the first quarter all-transactions HPI were refinancings, OFHEO said, the highest such share of activity since the third quarter of 2003. http://www.ofheo.gov.