U.S. Monthly House Price Index Estimates 0.3 Percent Price Decline from July to August

U.S. home prices fell 0.3 percent on a seasonally-adjusted basis from July to August, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.3 percent increase in July was unrevised. For the 12 months ending in August, U.S. prices fell 3.6 percent. The U.S. index is 10.7 percent below its April 2007 peak.

The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally-adjusted monthly price changes from July to August ranged from -1.6 percent in the South Atlantic Central Division to + 1.2 percent in the Pacific Division.

The full report provides some interesting graphs and charts. My favorite is Figure 2, which shows the true extent of the housing bubble and how far we could still fall. According to the chart, housing prices are now back to February 2005 levels. Figure 3 seems to show that prices declines are moderating. Most of the damage seemed to occur between March '07 and December '08. That's a bit strange considering the economy reached its steepest rate of decline in the fourth quarter of '08. I would have expected prices declines to accelerate.

In this downturn, housing prices seem to be both a leading indicator as well as a catalyst.

The goods news for those shopping for a home is that prices have now retreated to levels from four years ago. Mortgage rates also remain relatively low, with the average 30 year mortgage rate just above 5% at 5.084%,