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A column in The New York Times today exposes official housing data as “deeply misleading.” The columnist, David Leonhardt, calls the official numbers in today’s slowing housing market “the last refuge of soothing information about the real estate market on the coasts.”
Depending on which set you look at, you’ll see that prices have either continued to rise, albeit modestly, or have fallen slightly over the last year. … The numbers overlook all those homes that have been languishing on the market for months, getting only offers that their owners have not been willing to accept.
In reality, homes across much of Florida, California and the Northeast are worth a lot less than they were a year ago.
San Diego gets a mention in the column as one of these areas with lower house values and as an area where people “picked up their homes, turned them upside down and shook them like a piggy bank,” according to a San Diego-area mortgage broker interviewed.
David Leonhardt, the columnist, also includes a look at the federal government’s attempt at synthesizing information about particular houses – tracking houses from year-to-year. But he identifies several major blind spots in that effort, called the Office of Federal Housing Enterprise Oversight, or Ofheo. These are huge problems, at least with using the data for understanding an area like San Diego, and this is the best description of them I’ve come across.
First, it excludes any mortgage over $417,000, because Fannie Mae and Freddie Mac – the two big mortgage buyers – don’t own loans so large. Obviously, many mortgages on the coasts are bigger than that.
Second, the data for individual metropolitan areas includes not just house sales but also appraisals done for a mortgage refinancing. Appraisal values, as many people know, tend to be inflated.
Finally – and by necessity – the index includes only houses that have actually sold lately. In a falling market, with an enormous number of properties for sale, the houses that are selling tend to be more appealing than the average house.
If you haven’t already, click here to read one of Rich Toscano’s most recent posts documenting how San Diego’s housing market arrived where it is now. It’s mind-blowing. Pay attention to the divergence of the average monthly payment (bright blue line) and the interest rates (red line) in the second graph. What’s going to happen when interest rates go up even more?
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