Mary Steinmeyer’s Blog

 

Top officials with the National Association of Realtors and Standard & Poor’s, which issues the S & P / Case-Shiller Home Price Index, agreed this week their monthly reports are giving imprecise readings of price changes at all levels — national, state, and regionally — due to rare market conditions that are skewing survey results.

 

NAR reported last week that US median home prices fell 7.7% in March from a year ago.  The decline resulted largely from a market anomaly — a steep decline in costlier home sales due to tighter lending standards and high jumbo-mortgage rates coupled with a foreclosure-driven spike in cheaper homes.

 

“If there are a lot more homes sold on the low end and fewer on the high end, the median price is bound to drop dramatically,” NAR Chief Economist Lawrence Yun said.  “In normal times, a median price would reflect typical homeowner equity changes, but these are not normal times.  The jumbo [mortgage] market is frozen and the buying activity is more concentrated in lower value homes.”

 

The S & P / Case-Shiller Index, which Tuesday posted a 12.7% decline for February, is skewed for two reasons of its own — it tracks just 20 major markets (many among the hardest hit) and its “repeat sales” survey by design pulls individual homes both bought and sold in the last few years.  Many of those are now being dumped by distressed home owners and investors who bought at peak market prices and face higher mortgage rate adjustments.

 

The misleading home value figures are just one example of recently sketchy readings of the US economy.  US consumer confidence readings, for instance, have been wildly divergent.  NAR’s Yun said the financial media is seizing on the gloomy numbers and providing little analysis or historical perspective.  He freely admits that NAR’s readings are not accurately reflecting what’s happening with home values for the overwhelming majority of Americans.