Jason Bernabei, TriCastle Realty
DEL MAR, July 2 2012 – Gooooood Monday morning
and happy 4th of July week to San Diego and the Ole U.S. of A.!
Despite rumours to the contrary, there is ample evidence that the American
Dream of Home-owning is alive and kicking, and showing signs of improvement to
boot! But do these signs from data released by National home valuation sources
REALLY mean anything?
The Federal
Home Finance Agency's (or FHFA’s)Home Price Index (or HPI) indicates that home values
are up 0.8% in April on a monthly, seasonally-adjusted basis. April marks the
third consecutive month during which home values increased and the index is now
up 3% from last year. Keep in mind that the HP Index is on a 60-day delay, which
is why we are here discussing April’s numbers, and not June’s.
There are
several flaws in the FHFA's Home Price Index in addition to the aforementioned 60 day lag-time that need to be considered however;
flaws that make this supposed good news of a 0.8% upward tick look like funny
math formulated with magic numbers. First, the FHFA Home Price Index's sample
set is limited to homes with mortgages backed by Fannie Mae and Freddie Mac. The
HP index doesn’t factor in homes with FHA-backed mortgages. Just a half decade
ago, this wasn't such cause for scrutiny because the FHA insured just 4%
of all mortgages. At 2nd quarter’s end 2012, the FHA's market share
is estimated to be at more than 30%. So bottom-line, the HP Index does
not consider more than 30% of U.S. homes. The HP Index also excludes homes
backed by the VA; jumbo mortgages not securitized through the government; and
also omits portfolio loans held by individual banks. So all in all, those are
pretty big omissions. Further, the FHFA Home Price Index is based on the change
in price of a home on consecutive home sales. Its sample set does not include sales
of new home sales, nor does it consider purchases made with cash, as cash
purchases require no mortgage. When you consider that cash purchases were over
29% of the home resale market in April alone, that is another big omission that
could impact an overall assessment of the market in a big way.
So while I
believe that there are many good things going on in Housing as we approach the 4th of July holiday, there
are certainly many “reputable” sources saying opposing things in their
forecasts of future market conditions, as well as in their analysis of past
Housing data. The proof continues to remain in the pudding, and a close look at
the relative comparable sales data and market trends for any particular
property you may be looking to buy or sell by a professional like myself who
knows what they are doing is the best advice I can give.
Having said
that, you can contact me, Jason Bernabei, at jasonb@tricastle.com
and check me out each and every Monday on www.therealtyinsiders.com for more,
and be sure to tune in to see myself, and other local industry professionals
talking real estate on “The Realty Insiders,” the ONLY real estate show in
town!
Jay’s
Outlook: partly sunny
Jason Bernabei, TriCastle Realty
Jason Bernabei, TriCastle Realty
