Average U.S. home prices increased 12.95 percent from the fourth quarter of 2004 through the fourth quarter of 2005. Appreciation for the most recent quarter was 2.86 percent, or an annualized rate of 11.4 percent. The increase during 2005 is similar to the revised increase of 12.55 percent for the year ended with the third quarter of 2005, showing no evidence of a slowdown.
It will be difficult for us bubbleheads to claim that the numbers lend weight to our view of the housing market. This is a major piece of evidence that will get the housing cheerleaders all riled up. Get ready! We have another battle! We will win the war but this battle seems lost.
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We will win the war bc the fundamentals are on our side. The prices in the bubble markets simply are too far removed from fundamentals.
ReplyDeleteThis data states that in 2005 prices of the homes continued double digit growth. That's not inconsistent with the data showing that the market started slowing (inventories increasing, etc.). It all depends on when you think the slowdown started occurring. Remember, that 2005 was quite a frenzied year, especially during the spring and summer months.
ReplyDeleteeven if you look at just the quarter numbers for 4Q 2005 there is still plenty of ammunition for the housing cheerleaders.
ReplyDeletesteinravnik,
ReplyDelete"4th quarter was up YOY because of the extreme appreciation of the first two quarters. But take a look at July 2005 compared to January 2006"
This is all true. However, the OFHEO numbers quarter to quarter and year to year. The 4Q 2005 quarter numbers are generally higher in most place then the 3Q 2005. No this is not a seasonal effect.
We fight the battle using their weapon: housing is local.
ReplyDeleteCheck my ip when I say this David... OFEO only looks at data from Fannie Mae and Freddie Mac, which by law can't give a loan over $397k. As such the report tells you about the bottom of the of the market and nothing about the top. Furthermore the loan limit means that most sales in this area are excluded from the report.
ReplyDeleteHere's how you set the cheerleaders straight. The Q4 house price data is old news for 2 reasons, both of which have been mentioned in previous posts.
ReplyDelete1) house prices continue to rise right through the peak, while the number of houses sold falls sharply and inventory rises. As the poster said, house prices are in a lagging indicator of the market's direction. The buyers who bought in Q4 are "the last fools in the market" -- there are no more buyers willing to pay at that level. which brings us to point #..
2) overwhelming data shows that the market has stalled in Jan and Feb. Number of sales is down 30-50% yr/yr in many markets. Inventories are at 10-yr highs in many markets. Therefore, the market has turned sharply in the last 2 months; the OFEO data is already obsolete.