Explaining recent changes in home prices
The increase in housing prices in the past ten years can largely be explained by falling mortgage interest rates and changes in household income. This article offers some projections of what might happen to housing prices if mortgage rates increase.
FIGURE 1 a OFHEO House-Price Index ( Real ) — High Appreciation Census Divisions *
Business Review Q4 2006 www.philadelphiafed.org between 2001 and 2005, the united States saw an extraordinary increase in demand for housing and a rapid rise in house prices. in 2005, for the fifth consecutive year, sales of both new and existing homes hit record highs, according to the national Association of Realtors. The national average price of an existing home increased more than 8 percent, after inflation, in both 2004 and 2005, according to the Office of Federal housing Enterprise Oversight (OFhEO) — the highest annual rates in the history of 1 The data on house prices compiled by the OFhEO are for single-family homes. The sale prices of repeated sales of the same properties are tracked over time for those properties whose mortgages are purchased or securitized by the Federal national Mortgage Association (Fannie Mae) or the Federal home Loan Mortgage Association (Freddie Mac). To be included in the data, the mortgage on the sold property must meet the underwriting standards of Fannie Mae or Freddie Mac and cannot exceed a maximum loan limit ($417,000 in 2006). by their nature, OFhEO data include homes that have been improved but do not adjust the appreciation for the value of the improvement. They also exclude homes that have been mortgaged for amounts above the limit, even if they were previously included. nevertheless, by tracking specific properties over time, the data provide measures of the broad trend of house-price movements. n recent years, the u.S. has seen an extraordinary increase in demand for housing and a rapid rise in house prices. Data show that nationally, the average price of an existing home, adjusted for inflation, rose more than 8 percent in 2004 and 2005, a faster pace than in any previous year. Some people have questioned whether this rapid rise was sustainable, and recent declines in the housing market have made this question more urgent. in this article, Tim Schiller asks whether there was a so-called bubble in house prices or whether fundamental economic factors explain the rapid increase.
New arguments for employer-assisted housing
In some parts of the country, innovation and experimentation have helped employer-assisted housing (EAH) programs gain momentum, providing New Englanders additional rationale for implementing these programs. This article describes how EAH works, its potential benefits, how it is being implemented around the country, and how our region can make better use of these programs to promote competitiveness and affordable housing.