Home Price Declines Deepen

Submitted by Ronald Tennant with Metrocities Mortgage:

MBA (5/23/2008 ) Velz, Orawin
Home prices continued to deteriorate in the first quarter, according to the House Price Index (HPI) from the Office of Federal Housing Enterprise Oversight (OFHEO).
The HPI controls for the mix of sales by focusing on transactions on the same properties over time. It is based on repeat sales of homes financed through Fannie Mae and Freddie Mac; thus it excludes properties financed with jumbo loans and government-insured loans and under-represents subprime loans and loans financed with adjustable rate mortgages.

The all-transactions HPI, which includes refinance transactions, was flat in the first quarter from a year ago. The index excluding refinance transactions (i.e. the purchase-only index) showed a year-over-year decline of 3.07 percent after a 0.5 percent year-over-year drop in the fourth quarter of 2007.

Fifteen states posted year-over-year declines in home prices, with California, Nevada and Florida seeing more than an 8 percent drop in prices. In the fourth quarter of 2007, 11 states saw drops in home prices from a year ago. Of the 292 metropolitan areas covered in the report, 128 posted quarterly declines in the overall HPI, up from 99 in the fourth quarter.

A separate report showed that initial claims for unemployment insurance fell by 9,000 to 365,000 for the week ending May 17. This latest decline in initial claims provided further evidence that layoffs have stabilized in recent weeks and suggest another modest decline in nonfarm payroll employment in May.

Stock markets rallied and Treasuries declined on the news of an unexpected drop in initial unemployment claims. The yield on 10-year Treasuries was up 11 basis points and stayed around 3.91 percent by mid-Thursday afternoon.