Those Waiting for a Housing Bubble Are Going to Have to Keep Waiting

The Office of Federal Housing Enterprise Oversight (OFHEO) released their report on 1st Quarter 2006 housing prices today.

Businesss pundits with text at the ready for that “surely imminent” housing bubble are going to have to keep it on ice for now (the link to the full 75-page PDF report is at the first item under “What’s New” at OFHEO’s home page):

WASHINGTON, D.C. – U.S. home prices were 12.54 percent higher in the first quarter of 2006 than they were one year earlier. Appreciation for the most recent quarter was 2.03 percent, or an annualized rate of 8.12 percent. The quarterly rate is about one percentage point below the rate from the previous quarter and is the lowest rate since the first quarter of 2004. The figures were released today by OFHEO Acting Director James Lockhart, as part of the House Price Index (HPI), a quarterly report analyzing housing price appreciation trends.

Here are the quarterly results for the last 5 years:

Every region had positive appreciation in the quarter:

Your humble servant reviewed the state and metro-area data, and found that:

• Only two states had drops in the quarter (SD and IA), and those drops were 0.13% and 0.41%, respectively.
• Roughly 50 of the roughly 275 Metropolitan areas had decreases. Most were less than 1%. Trouble spots were where you’d expect them — in Midwestern areas affected by auto industry troubles, and in parts of California that had probably overheated previously.
• Don’t forget that the fall and winter quarters are usually weaker than spring and summer. 1q2006’s appreciation is actually greater than 1q2004’s, so it could be that a longer-term slowdown in home-price appreciation hasn’t even begun.

Of course, there could be a bit of trouble on the horizon with Fed interest rate changes and the increase in foreclosures mentioned here, but there are no signs of pervasive decay. In fact, it’s the opposite, as OFHEO noted:

“These data show average housing prices still growing stronger than some might have expected,” said Lockhart. “They do indicate, however, that price growth is moderating in some parts of the country, particularly in areas where prices have been rising the most.”

We’ll take that.