Austin Real Estate Blog

For Immediate Release Contact: Corinne Russell (202) 414-6921
February 24, 2009 Stefanie Mullin (202) 414-6376

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The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.

RECORD HOME PRICE DECLINES IN FOURTH QUARTER;
ISOLATED POCKETS OF STRENGTH

WASHINGTON, DC – U.S. home prices posted record declines in the fourth quarter of
2008 according to the Federal Housing Finance Agency’s House Price Index (HPI). The
FHFA seasonally-adjusted purchase-only house price index, based on data from home
sales, was 3.4 percent lower on a seasonally-adjusted basis in the fourth quarter than in
the third quarter. This decline was greater than the 2.0 percent decline in the third quarter
and the largest in the purchase-only index’s 18-year history. Over the past year,
seasonally-adjusted prices fell 8.2 percent from the fourth quarter of 2007 to the fourth
quarter of 2008.

FHFA’s all-transactions House Price Index, which includes data from home sales and
appraisals for refinancings, showed significantly less weakness over the latest quarter than
the purchase-only index. The all-transactions HPI fell 0.2 percent in the latest quarter. It
was down 4.5 percent over the four-quarter period, the largest four-quarter drop in the
index, which extends back to 1975. These data reflect trends as of Dec. 31, 2008.
FHFA has also included its monthly house price index through December 2008.
Prices increased 0.1 percent from November to December on a seasonally-adjusted basis
after a downward adjustment for November and are down 10.9 percent since their April
2007 peak.

“Price declines continued in the fourth quarter although not as rapidly as some had
expected,” said FHFA Director James B. Lockhart. “We are hopeful the housing initiatives
announced last week by President Obama will begin to provide much-needed stability to
the housing markets.”

While the national purchase-only house price index fell 8.2 percent between the fourth
quarters of 2007 and 2008, prices of other goods and services rose 1.4 percent.
Accordingly, the inflation-adjusted price of homes fell approximately 9.6 percent over the
latest year.

Significant Findings:
Purchase-only Index:
1. Prices fell over the last four quarters in 44 states and Washington, D.C.
2. Four-quarter price declines exceeded five percent in 22 states and were in excess
of 10 percent in eight states.
3. All nine Census Divisions experienced price declines in the latest quarter. Prices
were weakest in the Pacific Census Division, which experienced a 7.1 percent
seasonally-adjusted price decline in the quarter and the West South Central
Division was strongest, with a seasonally-adjusted decline of 0.9 percent.
All-transactions HPI:
4. The MSAs with the greatest appreciation over the past year were: Decatur, AL
(6.6%), Monroe, LA (6.3%), Kingsport-Bristol-Bristol, TN-VA (6.3%), Austin-Round Rock, TX (4.4%).
5. Of the 20 ranked cities with the greatest price declines over the last four quarters,
all but one (Las Vegas-Paradise, NV) was in California or Florida.
6. The MSAs with the sharpest depreciation over the year: Merced, CA (-49.5%),
Stockton, CA (-40.2%), and Modesto, CA (-37.8%).
The complete list of state appreciation rates is on pages 15 and 16.
The complete list of city (MSA) appreciation rates is on pages 30–46.

Highlights/Technical Note
The quarter’s Highlights article updates an analysis that was provided in the last HPI
discussing alternative weighting systems that might be used in constructing the national
house price index. This release uses data through the fourth quarter to produce an
alternative, state-weighted national index and compares that index against the standard
Census Division weighted index. FHFA continues to study options for reweighting the
national index.

Background:
FHFA’s purchase-only and all-transactions house price indexes track average house price
changes in repeat sales or refinancings of the same single-family properties. The purchaseonly
index is based on more than five million repeat sales transactions, while the alltransactions
index includes more than 36 million repeat transactions. Both indexes are
based on data obtained from Fannie Mae and Freddie Mac for mortgages originated over
the past 34 years.

FHFA analyzes the combined mortgage records of Fannie Mae and Freddie Mac, which
form the nation’s largest database of conventional, conforming mortgage transactions. The
conforming loan limit for mortgages purchased since the beginning of 2006 has been
$417,000. Loan limits for mortgages originated in the latter half of 2007 through
December 31, 2008 were increased to as much as $729,750 in high-cost areas in the
continental United States. The American Recovery and Reinvestment Act, passed on Feb.
16, 2009, extended those limits for 2009 originations in places where those limits were
higher than those originally calculated for 2009.

This HPI report contains four tables: 1) A ranking of the 50 States and Washington, D.C. by
House Price Appreciation; 2) Percentage Changes in House Price Appreciation by Census
Division; 3) A ranking of 292 MSAs and Metropolitan Divisions by House Price
Appreciation; and 4) A list of one-year and five-year House Price Appreciation rates for
MSAs not ranked. Note that the Office of Management and Budget (OMB) announced
three new MSAs in late 2008: Cape Girardeau-Jackson, MO-IL, Manhattan, KS, and
Mankato-North Mankato, MN. Metropolitan area index series are now available for these
cities.

So, I read this and it validated my gut feeling about the market that we are in in Austin. (You can read the full report here) Austin has been virtually immune to the housing market woes that are causing widespread panic, loss, and foreclosure. That is not to say that we haven’t felt some impact to the curent economic turmoil, but moreso that we have seen a market adjustment to the hay days of 2006-2007, but that Austin is still growing and appreciating within our 4-7% “norm”.

I have to admit that watching the local and national news has started to skew my own view of the local economy. It’s too bad that there’s not a more balanced way to get the daily news. I suppose we have to chalk it up to misery, crime, drama, etc sells. Getting back to the report, I pulled these snippets from the full report and wanted to share them.

HUD has just announced the new (old) FHA loan limits:

SFR/Condos – $288,750

2-units – $369,650

3-units – $446,800

4-units – $555,300

This essentially takes us back to last year’s loan limits!

Conventional conforming limits stay the same at $417,000.

FHA is expected to account for almost 40% of all loans originated this year.  If you have any questions on FHA contract, guidelines, etc., just give me a call!

Marie Funston

Senior Mortgage Advisor

Cell:  (512) 750-7270

Office:  (512) 691-6757

Fax:  (512) 343-1224

There are so many options with regard to mortgage loans, that the opportunity to review some basic terms is the best approach before obtaining a loan. Often heard during the mortgage and home buyer experience are several references to federal mortgage corporations. Rarely are they explained in a simple clear manner. We will begin by explaining what Fannie Mae, Freddie Mac and Ginnie Mae actually are and how they apply in the industry.

Fannie Mae is Federal National Mortgage Association or FNMA – The Company was chartered by the congress, however it is share-holder owned. Currently they are the principal supplier of residential mortgage funds.

Ginnie Mae or the Government National Mortgage Association or GNMA – The Company is a part of the United States Department of Housing and Urban Development (HUD). This Government agency was created by Congress to provide mortgage funding for lenders who are purchasing with a VA or other Government owned / backed Loans.

Freddie Mac is the Federal Home Loan Mortgage Corporation or FHLMC – This Company is a shareholder run company who creates a secondary mortgage market by purchasing all forms of loans from the primary market for mortgage lenders.

Generally speaking the two share holder based companies do not have much if any federal involvement. Recently due to the Real Estate Mortgage Crisis, and the subsequent repercussions, the federal government has altered their position. They now hold influential positions with in both companies to attempt to circumvent further problems. Time will tell if this was the correct choice for the country and the real estate market place.

Remember all of those stories back in 2000 about people who invested their life savings in Pets.com? Or the stories about successful businessmen who gave it all up to be day traders? Well the collapse of the real estate bubble has largely lacked those same kinds of implausible anecdotes…until now.Realtors and lenders are increasingly reporting on a trend that’s a sure indication as to just how far we’ve come. It’s called “taking the inside of the house with you” and it’s what happens when disgruntled homeowners trash their foreclosed homes before abandoning them. Think of it as a reverse housewarming gift for their bank.

Pigs left to trash house: Police believe homeowner left pigs in this home without food or water, hoping they would trash the place after he was forced out by foreclosure.

How crazy is this? I was watching the debates tonight when I heard some commentary from Glenn Beck. He was talking about the mortgage crisis and mentioned these photos from his website and I couldn’t resist. As an active agent who occasionally works REOs and HUDs, I have seen some dumps before, but this takes the cake. I understand how angry, demoralized, and scared people must be when going through a foreclosure, but when people start destroying other people’s property something needs to be done. We all end up paying for the damage in the end in the form of higher interest rates or less flexible terms.

What’s the worst damage a property has sustained from people losing their home to foreclosure that you’ve ever seen?

The worst I’ve seen was a home that had all the major AND all the minor appliances removed. Holes in the walls and ceilings where said appliances used to reside. Additionally, the owners must have gotten their rebuilt their motorcycle in the living room because the carpet in the living room was covered with 10W30. I can understand that, but dripping the oil throughout the house must have taken some time because it was on everything. I wonder if that would be a potential source of fire since they always tell you never to leave oily rags lying around? Anyway, it was a damned shame.