Home prices decline at record rates in fourth quarter

Home prices decline at record rates in fourth quarter

WASHINGTON, DC – U.S. home prices posted record declines in the fourth quarter of 2008 according to the Federal Housing Finance Agency’s House Price Index (HPI). The FHFA seasonally-adjusted purchase-only house price index, based on data from home sales, was 3.4 percent lower on a seasonally-adjusted basis in the fourth quarter than in the third quarter. This decline was greater than the 2.0 percent decline in the third quarter and the largest in the purchase-only index’s 18-year history. Over the past year, seasonally-adjusted prices fell 8.2 percent from the fourth quarter of 2007 to the fourth quarter of 2008.

FHFA’s all-transactions House Price Index, which includes data from home sales and appraisals for refinancings, showed significantly less weakness over the latest quarter than the purchase-only index. The all-transactions HPI fell 0.2 percent in the latest quarter. It was down 4.5 percent over the four-quarter period, the largest four-quarter drop in the index, which extends back to 1975. These data reflect trends as of Dec. 31, 2008.

FHFA has also included its monthly house price index through December 2008. Prices increased 0.1 percent from November to December on a seasonally-adjusted basis after a downward adjustment for November and are down 10.9 percent since their April 2007 peak.

“Price declines continued in the fourth quarter although not as rapidly as some had expected,” said FHFA Director James B. Lockhart. “We are hopeful the housing initiatives announced last week by President Obama will begin to provide much-needed stability to the housing markets.”

While the national purchase-only house price index fell 8.2 percent between the fourth quarters of 2007 and 2008, prices of other goods and services rose 1.4 percent. Accordingly, the inflation-adjusted price of homes fell approximately 9.6 percent over the latest year.