10. September 2006 • Bruce Fields
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Ken Clark writes:
Thought you guys would be interested in this. This CNN/Money story reports on a new Office of Federal Housing Enterprise Oversight report. The OFHEO is the federal oversight board for Fannie Mae and Freddie Mac. While real estate values are still increasing across most of the nation, the rate of increase is falling fast. In some markets, the price of real estate has actually fallen in the past year. Many of those markets are in Michigan, and the worst in the nation for real estate values over the past year is Ann Arbor.
Page 22 of the OFHEO report shows that Ann Arbor real estate values lost 1.28% of their value in the past year, lost 1% in the most recent quarter, and gained 20.97% over the past five years. That makes us worst of the largest 275 MSAs in the past year.
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1.28% does not strike me as accurate. I think it is much worse. It seems that in my neighborhood the going price per square foot is around $140 down about 20% percent, this last year alone. Yet houses have begun to sell around that price, which is a relief to see. Maybe with Google and Toyota coming to the area, things will stabilize.
—Emilia Sep. 10 '06 - 05:23AM #
Emilia,
As I understand it, this particular measure is not based on median sale price, which is what you’re talking about. I believe this particular measure is looking at homes that aren’t for sale, not as a “what are things selling for right now,” but, “what is it worth right now, even if you’re not selling it?” Nit-picky, but apparently important? Usually I just smile and nod when economists make up indicators…
—Murph Sep. 10 '06 - 06:34PM #
Murph,
That OFHEO study looks at sales of homes from year to year. It naturally excludes new home sales, and studies only resales on chosen homes. Also, that study only looks at conforming loans originated/backed by Fannie Mae and Freddie Mac.
From the study, page 2: “OFHEO’s House Price Index is published on a quarterly basis and tracks average house price changes in repeat sales or refinancings of the same single-family properties. OFHEO’s index is based on analysis of data obtained from Fannie Mae and Freddie Mac from more than 31 million repeat transactions over the past 31 years.”
An interesting metric, to be sure, but what the heck does it mean? Especially considering the rise in foreclosures is, in part, due to “drive-by” appraisals where the bank is told the property is worth more than it really should be valued.
—Todd Waller Sep. 11 '06 - 02:08AM #
I just got back from NJ, on a work trip. People there are apoplectic about the drop in home prices. Far more hysterical than Ann Arborites. I’m not concerned about AA’s home prices.
I AM concerned that the Mayor and Council have apparently done nothing to help smooth the way for Google to move downtown….
—Just a homeowner Sep. 11 '06 - 05:00PM #
Homeowner: At the last meeting they passed a resolution that basically tells Google they will do everything they can to get them downtown. Don’t know what else they can do, they have already offered them sites and parking.
—Dustin Sep. 12 '06 - 07:31AM #
That must have happened while I was away. When I left, there was a lot of Google handwringing. Thanks.
—Just a homeowner Sep. 12 '06 - 04:33PM #
My first reply seems to have been eaten, so I’ll try again. The Economist Magazine says that the OFHEO numbers are more valuable that National Association of Realtor (NAR) numbers, but come with larger time lags.
There’s a story in today’s CNN/Money that talks about a mass foreclosed-home auction in Michigan.
It could be that in Ann Arbor, houses are still selling, albeit at lower prices, whereas in the rest of the state they’re just headed for foreclosure.
Another possiblity is that Ann Arbor is one of the few representatives of Paul Krugman’s “Zoned Zone”, and the rest of “Flatland” Michigan is in the economic sink so the housing bubble in “Zoned” Ann Arbor is popping faster than elsewhere.
Finally, it may be that there are more auto-related white-collar workers here than people think.
—Ken Clark Sep. 12 '06 - 09:18PM #