Real Estate: What Really Happened To Home Prices

We’re not going to restore the housing market without solid factual evidence to suggest that home prices have started to turn around. A good source for such evidence is the Federal Housing Finance Agency (FHFA), the government body that now oversees Fannie Mae and Freddie Mac.

In figures release yesterday, FHFA tells us that in the second quarter home values nationwide fell .07 percent when compared with the first quarter. This is good news in the sense that it could have been far worse given rising unemployment levels and increasing foreclosure rates.

In fact, the FHFA quarter-to-quarter numbers are fairly useless. The reason is that the first quarter is Winter, not exactly a robust selling season. The second quarter is the Spring and the start of summer, a period when demand heats up.

No less important, in the second quarter we have had the start of the government loan modification program, a program which has put more than 230,000 distressed borrowers into three-month loan workout trials. This means these owners are not facing foreclosure unless they fail the trial period — and, unfortunately, many will. In essence, these are delayed foreclosures.

Lastly, there are any number of state moratoriums preventing foreclosures in the short term and private-sector efforts to hold down foreclosure numbers that started in the first quarter and are keeping distressed homes off the market..

The real number from FHFA that counts is that home values in the second quarter fell 6.1 percent when compared with the second quarter of 2008. That’s again not a perfect comparison, but it’s much closer to reality than quarter-to-quarter numbers.

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