And here’s yet another example of official stats differing from the rest.
US house prices are falling, we all know that, yet the Office of Federal Housing Enterprise Oversight (OFHEO) has price falls lagging well behind the falls stated by the widely watched Case Shiller index.
Okay, the OFHEO has prices down, in fact it has falls hitting a record but only because it has rarely recorded any kind of fall at all in the past.
“Over the past year, prices fell 3.1 per cent between the first quarter of 2007 and the first quarter of 2008. This is the largest decline in the purchase only index’s 17-year history,” said the official OFHEO release.
Yet the Case Shiller index has got prices down by 9 per cent.
Why do they differ so? Capital Economics reckons it is down to this: “The OFHEO index is based only on sales where the mortgage conforms to the standards required by Fannie Mae and Freddie Mac, while the Case-Shiller index also includes purchases based on sub-prime, Alt-A and jumbo loans. The problem is that issuance of all non-conforming loans is now basically zero, so the two samples should be closer than ever. The geographical coverage also differs slightly, the Case-Shiller index gives a heavier weighting to urban areas that are likely to see bigger price falls.”
So who do you believe? Well, the OFHEO’s President was appointed by George Dubya himself, but on the other hand, the Case Shiller index is much closer to the indices published by other bodies showing prices for starter and existing homes.
Besides, when the official data doesn’t support what everyone is saying, and another index which has long been highly acclaimed is closer to what people are saying, who do you believe?
Mind, whoever is right, one thing is for sure. Not only are US house prices falling, but the fall shows no signs of slowing.
© Investment & Business News 2013