Conforming Loan Home Prices Decline

By:
Peter King | November 25, 2010

U.S. home prices fell again in the third quarter of the year, resuming a three-year downward trend following a brief uptick in the second quarter.

 
Sales prices of homes purchased with conforming mortgages declined 1.6 percent in the third quarter, according to figures released today by the Federal Housing Finance Agency (FHFA). That followed a 0.68 percent gain in the second that was the first quarterly increase since the second quarter of 2007.
 
On an annual basis, sales prices were down 3.18 percent from the same period last year. Prices of other goods and services rose about 2 percent during that same period, meaning that house prices fell approximately 5.1 percent in real terms.
 
Month-to-month, prices were down a seasonally adjusted 0.7 percent in September compared to August.
 
The FHFA figures have generally shown less severe price declines since the housing downturn began compared to other widely used index such as Standard & Poor’s/Case Shiller and the National Association of Realtors. The agency attributes this in large part to the fact that its figures are based on conforming-mortgage data supplied by Fannie Mae and Freddie Mac.
 
The two agencies, which back the vast majority of middle-class mortgages in the U.S., have a limit of $417,000 on mortgages they will purchase or insure for most parts of the country, although that can go up to nearly $730,000 in high-cost areas. As a result, the FHFA figures only reflect conforming mortgages that are within those limits.

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