Thursday, March 08, 2007

bubble world tour / prices 1997-2006

the picture for the us is clearly overstatet (for germany not....). make sure you read the comments about the ofheo data.

die daten für die usa sind anzuzweifeln und entsprechen nicht der realität. unbedingt die kommentare zu der ofheo erhebung lesen.

THE global housing boom has lost a lot of its vim. The annual rate of house-price inflation has eased since the last quarter of 2005 in ten of the 20 countries The Economist tracks each quarter.


America is one of them. In the year to the fourth quarter of 2006, the price index compiled by the Office of Federal Housing Enterprise Oversight (OFHEO), a regulator, rose by 5.9%, the lowest annual rate for seven years. The OFHEO index gives a more accurate picture than more timely series, because it tracks the value of the same houses when they are resold or remortgaged. As a result the index is not pulled this way and that by changes in the mix of houses sold.
not so fast!
this are comments from paul in jax and deb.
OFHEO data is great, but remember this news is about six months old
The OFHEO data is not terribly relevant for many high priced metro areas.
The methodology uses only “TRANSACTIONS INVOLVING CONFORMING, CONVENTIONAL MORTGAGES PURCHASED OR SECURITIZED BY FANNIE MAE OR FREDDIE MAC”.
How many transaction in Los Angeles or similarly high priced cities meet this criteria? I would guess only a small fraction.
So they are basing this entire index on the sales at the VERY BOTTOM entry level into the market, and most likely transactions involving somewhat more qualified buyers who can actually get standard financing meeting GSE guidelines.
Not a very representative sampling!


The housing slowdown has already made itself felt in the GDP statistics, as homebuilders have cut back on construction. So far, it has not hurt consumption, the principal engine of the American economy. But that may yet happen. Flatter prices may encourage homeowners to rein in their spending. And troubles in the subprime mortgage market may spread, inhibiting lending to borrowers in better standing, and thus feeding back into prices.

American homeowners may take heart from the experiences of two other once-booming markets: Australia's and Britain's. Both stalled in 2005, yet both have clocked up house-price inflation of around 10% in the past year. However, the effects of recent increases in interest rates in Britain have yet to be seen. And Australia's official index, a weighted average of prices in eight capital cities, was boosted by booms in Perth (up by 36.9% in the year to the fourth quarter) and Darwin (17.6%). Prices in Sydney, the biggest city, fell a bit.

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2 Comments:

Blogger regli said...

good blog and excellent points, jmf!

10:30 AM  
Blogger jmf said...

hi regli,

thanks.

it is also nice to see that more and more smart people joining

"the market traders board"

have a nice weekend

10:52 AM  

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