Arizona Home Prices Drop - According to Who?
September 5, 2007
Post Tags: Arizona-Home-Price-Index-Second-Quarter-2007 , arizona_daily_star , housing-statistics , office-of-federal-housing-enterprise-oversight , Tucson-AZ-Real-Estate , Tucson-Home-Price-Index
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Or should I say what data set?
Today we continue talking about article in the Arizona Daily Star last Thursday “Arizona Home Prices Drop for first time in 16 years” I’ve been digging into this article and specifically the report it is based on even more since yesterday. It appears there is even more to the data basis than was clearly indicated in the article itself. Here is the quote from the paper as outlined in yesterdays post:
Basis of Data:
“The statistics reflect how much the values of existing homes have gone up — or down. The agency tracks average price changes in repeat sales and re-financing of the same single family properties, using statistics from mortgage transactions. ”
Any transaction with a CASH buyer will not be included in these figures.
The part that had me curious was the “…and re-financing of the same single family properties,”
My question. How do these figures come into play in determining the increase or decrease in Home Prices, when there clearly is not sales transaction?
In the report itself it states:
The Effect of Refinance Appraisal Data:
Comparing the HPI with an Index
Based Solely on Purchase Transactions Data
An important factor that has affected the HPI in some recent quarters is the influence of refinancings on the overall index. The figure below shows percent changes in the HPI for the United States as a whole over the prior four quarters compared with changes in an index constructed using only house prices associated with mortgages used for house purchases. The trend is generally the same, but the purchase-only index is smoother. Over the past year, while the U.S. HPI has risen 3.2 percent, the purchase-only index has risen 2.6 percent.“
Wait a minute, you mean there is a purchase only index? Another data set that does not include refinance data? Which report is used for the Arizona Home Prices Drop First time in 16 years. It is the report with Re-financing data included.
Is there anyone in this state that doesn’t believe the number of people re-finaincing their homes in the second quarter of 2007 wasn’t less than the first quarter of 2007?
I went back to the 2007 first quarter report and found this little nugget:
“The new purchase-only indexes offer some advantages over OFHEO’s all-transactions HPI. Empirical analyses performed by academic and industry researchers have suggested that home appraisals, which are used in the construction of OFHEO’s all-transactions index, may be systematically biased measures of true home values.“
How much of the data for the overall report is coming from appraisals for re-financing? The answer was in the next paragraph.
“refinance appraisals comprise a significant proportion of OFHEO’s valuation data”
A significant portion of the data set is made up of re-finance appraisals and NOT Home Sales Transactions.
This leaves us with another question. When we look at the HPIPO report which is Home Price Index Purchase Only Report is there a drop in home prices for the 2nd quarter of 2007?
(Before answering, remember the drop we are talking about in this report with re-finance data included is less than 3/10ths of 1 percent. But significant enough for the newspaper to report this as a BIG DEAL for Tucson home buyers and Sellers.)
ANSWER: NO IT DID NOT DROP !!!
The data for the Purchase Only report is included in a text file with all the quarters going back over the past 16 years. It is broken down by state and here is the data for Arizona.
State, Year, Quarter, Index
AZ 1991 1 100
AZ 1991 2 99.79
AZ 1991 3 99.04
AZ 1991 4 101.6
AZ 1992 1 101.9
AZ 1992 2 101.01
AZ 1992 3 102.54
AZ 1992 4 103.57
AZ 1993 1 104.28
AZ 1993 2 105.12
AZ 1993 3 106.75
AZ 1993 4 109.16
AZ 1994 1 110.16
AZ 1994 2 112.74
AZ 1994 3 114.6
AZ 1994 4 116.93
AZ 1995 1 117.9
AZ 1995 2 119.28
AZ 1995 3 121.19
AZ 1995 4 122.06
AZ 1996 1 123.49
AZ 1996 2 125.15
AZ 1996 3 126.72
AZ 1996 4 127.21
AZ 1997 1 127.76
AZ 1997 2 129.85
AZ 1997 3 130.96
AZ 1997 4 132.06
AZ 1998 1 132.71
AZ 1998 2 136.25
AZ 1998 3 138.14
AZ 1998 4 138.89
AZ 1999 1 141.08
AZ 1999 2 143.72
AZ 1999 3 146.18
AZ 1999 4 147.54
AZ 2000 1 150.13
AZ 2000 2 152.35
AZ 2000 3 153.29
AZ 2000 4 156.18
AZ 2001 1 158.01
AZ 2001 2 161.72
AZ 2001 3 163.42
AZ 2001 4 165.98
AZ 2002 1 167.12
AZ 2002 2 170.91
AZ 2002 3 173.78
AZ 2002 4 177.2
AZ 2003 1 180.29
AZ 2003 2 185.2
AZ 2003 3 188.28
AZ 2003 4 193.99
AZ 2004 1 199.25
AZ 2004 2 208.2
AZ 2004 3 219.22
AZ 2004 4 229.31
AZ 2005 1 244.66
AZ 2005 2 269.82
AZ 2005 3 290.88
AZ 2005 4 302.27
AZ 2006 1 314.8
AZ 2006 2 321.61
AZ 2006 3 319.86
AZ 2006 4 322.86
AZ 2007 1 324.71
AZ 2007 2 325.32
I’ve placed the quarters that reflect a lower than previous quarter number in bold.
The only quarter showing an actual down from previous quarter since 2nd Quarter 1992 was 3rd Quarter 2006, NOT SECOND QUARTER 2007. This is OLD NEWS.
If you don’t think this article has created lots of misinformation and conclusions that are not based in the true market just read some of these comments written in response to this article appearing in the “Arizona Daily Star”. Is the goal information or mass hysteria over the housing market?
With this additional information is it even necessary to go over the Year Over Year figures? Please Dave no more numbers, my head is starting to hurt.
Not here, not now. I’ll do it in another short post only because it is important to know how to read these reports and analyze the numbers instead of just jumping to conclusions like the media seems to enjoy and like many of the comments mentioned above.
Here are links to the data sources mentioned in this and yesterdays posts.
Home Price Index Reports by Quarter
Home Price Index Downloadable Data Sets
Home Price Index Purchase Only Text File (2nd Quarter 2007)
The bottom line: When you take out refinance appraisal data there is no drop even with high inventories and lots of bad new being circulated Arizona is still showing a slow steady increase in the Home Price Index Purchase Only reporting.
September 7th, 2007 at 7:02 am
The problem with this data is consistency. Different reporting periods are used by each media outlet. Makes it all very confusing because they often do not site the source of their data. I keep using the same data that I take from our MLS. The majority of the sales in MN are recorded in the MLS. yet my numbers differ from the national reports.
September 7th, 2007 at 7:10 am
T,
It also makes me wonder what is the basis for the logic that says refinance data isn’t the best for determining the home price index because of the nature of this appraisal data, but it increases our sampling significantly so we use it.
We put motor oil in our chicken soup. It makes the soup taste terrible, but we’ve found there is more soup if we put the motor oil in it.
More is better? Or a lot of useless soup?