“When an economy is growing rapidly, and the population is increasing, house prices are likely to rise (and vice versa)…That is what has happened in the United States since the summer of 2007, when house prices peaked, as measured by the Federal Housing Finance Agency index…
…The index did not rise as rapidly as some others did during the boom, but it continued to go up for nearly a year after a major competitor, the Case-Shiller 20-city composite, peaked. That index has not recovered as rapidly as the housing finance agency index since the recession ended…..Over all, the housing finance agency reported this week, home prices nationally have recovered to the point that they are only 4.6 percent lower than the peak value.”, Floyd Norris, “Where House Prices Shot Up, Rebound Is Slowest”, New York Times
“I want to make a couple of important points related to this article: First, the Case-Shiller index was not widely known or used before the housing/mortgage crisis. My recollection is that we and other industry players really started using Case-Shiller in 2008 and later. The Federal Housing Finance Agency Index (it used to have a different name) was widely used by IndyMac Bank and others in the industry, pre-crisis. This housing index was the “gold standard”, because the U.S. government produced it and Fannie and Freddie mortgage limit increases were tied to it. Think about this fact related to the FDIC’s meritless allegation in their civil suit against me (which I formally denied in the settlement agreement). The FDIC says starting in roughly April/May 2007 that I was a negligent banker, because I should have known that a huge housing bubble was bursting and it was going to precipitate a mortgage and financial crisis and so I should have reduced IndyMac’s mortgage lending volumes (even more than I was doing). Yet, as this article points out, the government’s own housing price index was rising through June 2007!!! And my recollection is this index was published with a few month’s lag, meaning that since the first index decline was July 2007, the industry nor I would not have seen that decline until September 2007. October 2007 was the end of the FDIC’s allegation period against me!!! Second, this article focuses on GDP growth being tied to housing price increases (or decreases)….maybe? However, in terms of housing affordability and unsustainable housing bubbles, I believe that most economists and housing experts actually compare median American household income growth to home price growth (which is not perfect either, because homes in many markets have become a “luxury good”). That being said, think about the stat in this article that home prices nationally are just 4.6% below their peak in July 2007….yet every article I have read recently discusses the fact that American median household incomes have actually declined about 8% (on a real, inflation-adjusted basis) since 2007. I can’t easily find nominal incomes, as you would need those to compare to nominal home prices, but roughly speaking, inflation has been less than 2% a year, so nominal median incomes are probably about flat or so since 2007. So, incomes are roughly flat and home prices are within 5% of their peak; do we have another national housing bubble right now? These figures say we should, right? And if we don’t, why? Maybe during the crisis, it was just the short sellers telling us we had a housing bubble and driving the markets down; so they could make a bundle on their short bets, close them out, buy at the bottom, and ride housing prices and the markets back up? Isn’t this exactly what prominent investor/speculator John Paulson (among others) did? Has anyone in our government seriously investigated this possibility?”, Mike Perry, former Chairman and CEO, IndyMac Bank
Where House Prices Shot Up, Rebound Is Slowest
SEPT. 26, 2014
Off the Charts
By FLOYD NORRIS
WHEN an economy is growing rapidly, and the population is increasing, house prices are likely to rise.
Conversely, areas with slow growth are not likely to see house prices increase.
That is generally what has happened in the United States since the summer of 2007, when house prices peaked, as measured by the Federal Housing Finance Agency index.
But there are exceptions. In the Pacific region, house prices soared during the boom. But they have performed relatively poorly in recent years even though the regional economy has outpaced the national one.
In the East North Central region — Illinois, Indiana, Michigan, Ohio and Wisconsin, the bulk of the states in the so-called Rust Belt — the economy has grown more slowly than in any of the other eight regions tabulated by the Census Bureau, and population growth has also lagged other regions. But home prices have performed better than might have been expected.
The anomalies appear to reflect excesses during the housing boom. In the seven years before home prices peaked in June 2007, they rose 60 percent for the entire country. But in the Pacific states — Alaska, California, Hawaii, Oregon and Washington — prices climbed 115 percent.
House Prices Follow the Economy, Mostly
Since the housing bubble burst, home prices in the United States have generally recovered the most in areas with the strongest economic growth. But prices have lagged growth in the Pacific states. And in the Upper Midwest — the Census Bureau’s East North Central division — the economy has grown slowly, but home prices have done better than might have been expected.
Perhaps as a result, home prices in that region fell further than in any other region during the Great Recession, and now remain 14.1 percent lower than they were in June 2007, despite an economy that has done better than the national average.
Over all, the housing finance agency reported this week, home prices nationally have recovered to the point that they are only 4.6 percent lower than the peak value.
As can be seen in the accompanying charts, the East North Central states have matched that performance, and thus done better than many regions, despite having less economic growth than any other region since mid-2007. That may reflect the fact that house prices in that region rose just 26 percent during the seven years before the housing bubble burst, less than in any other region.
House price indexes, it should be noted, can vary sharply. The housing finance agency index uses mortgages bought or insured by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that the agency regulates. That excludes the sales history of homes that require so-called jumbo mortgages, loans too large for Fannie and Freddie to buy.
The index did not rise as rapidly as some others did during the boom, but it continued to go up for nearly a year after a major competitor, the Case-Shiller 20-city composite, peaked. That index has not recovered as rapidly as the housing finance agency index since the recession ended.
According to the agency index, the best-performing region since 2007 has been the one called West South Central by the Census Bureau, comprising the states of Arkansas, Louisiana, Oklahoma and Texas. Home prices there are now 14.6 percent higher than they were in the summer of 2007.
That is also the section that has had the strongest economic growth during the period, in large part because it benefited from the boom in energy production. At the end of 2013 — the latest regional data available — the real gross domestic product of that group of states was 18.6 percent larger than it had been in mid-2007. That is more than twice the growth of the entire country during the period.
The mining industry, which includes oil and gas wells, accounts for about 10 percent of the economy in that region but produced 20 percent of the growth over the period.
In the West North Central area — Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota — home prices are 1.6 percent higher than they were in mid-2007. That area’s G.D.P. is up 11.8 percent, in significant part because of a surge in shale gas production in part of the region, and its population has also been rising. North Dakota, the center of the oil boom, has experienced both a surging population as people move in and the fastest economic growth of any state.A version of this article appears in print on September 27, 2014, on page B3 of the New York edition with the headline: Where House Prices Shot Up, Rebound Is Slowest.