Home prices for the second quarter dropped 0.6 percent beneath figures reported during the first quarter this year, according to the ""Federal Housing Finance Agency"":http://www.fhfa.gov/ (FHFA), which released a price index for seasonally adjusted home purchases Thursday. Quarterly declines in prices amounted to 5.9 percent on a seasonally adjusted basis.[IMAGE]
The FHFA calculates its index with purchase price information drawn from homes with mortgages backed by ""Fannie Mae"":http://www.fanniemae.com/kb/index?page=home&c=homepage and ""Freddie Mac"":http://www.freddiemac.com/.
Seasonally adjusted prices plunged by 5.9 percent over the past year, according to the FHFA, with a quarterly decline occurring despite an uptick in seasonally adjusted house prices month-over-month. Meanwhile, the federal agency's all-transactions index fell by 1.9 percent in the last quarter, marking a 4.5-percent dearth over the last year.
Speaking to _MReport_, Andrew Leventis, a senior economist with the FHFA, explains the price downturns by citing weak buyer confidence in lieu of the manic markets and lingering foreclosures that create competition for new home construction.
""We're still in a very weak patch in the housing market,"" he says. ""Inventories remain very large. Even though we have very strong affordability levels, there are a lot of folks on the sideline worried about future price declines that will not price loans.""[COLUMN_BREAK]
He describes consumer confidence as the key, citing the ""psychology involved in the real estate industry"" that create declines with a ""demand side effect.""
Asked what may be most responsible for the price declines, Leventis cites ""the fear or belief that prices may decline further. Homebuyers want to wait out the market for places that may have bottomed out. Once you get a steady stream of news reports that prices are declining, people ask, 'Why should I buy now when I can buy later?'""
Some foresee continuing home price declines as a result of economic distress and official reaction.
""_The Huffington Post_"":http://www.huffingtonpost.com/2011/08/17/federal-reserve-interest-rates-richard-fisher_n_929952.html quoted Richard Fisher, president of the ""Federal Reserve Bank of Dallas"":http://dallasfed.org/, as describing the Fed's decision to keep interest rates low until 2013 as ""missing the point"" discussions needed for a housing recovery.
""You might now say to yourself, ├â┬ó├óÔÇÜ┬¼├ï┼ôI understand from the ""Federal Reserve"":http://www.federalreserve.gov/ that I don't have to worry about the cost of borrowing for another two years,"" the _Post_ quotes Fisher as saying in prepared remarks. ""'What incentive do I have to invest and expand now? Why shouldn't I wait until the sky is clear?""
Asked whether there is any merit to claims that fixed interest rates for two years would dent buyer demand, Leventis said, ""I don't quite see the logic behind that. I can sort of see it if mortgage rates were to go even lower. You might wait six months to a year when mortgage rates were lower.""
Regionally, the Washington, D.C. metro area defied the report with a 7.15-percent quarter-over-quarter increase in home prices, alongside 5.53 percent for Hawaii and 4.10 percent for Oklahoma. Locally, Pittsburgh also revealed upticks over the past year, with a 3.69-percent jump in prices for city real estate.
Atlanta, Georgia showed the worst declines in annual prices, falling some 14.09 percent over the period.