The Federal Office of Housing Enterprise released its statistics on the prices of homes nationwide. The report is a month by month and broken down by the nine national census districts. The data is based on the purchase prices of houses backed by Fannie Mae or Freddie Mac. So they have pretty complete underlying data to build their analysis. The current report shows statistics up until the end of November 2008, so prices are probably lower now than the report reflects. They note that prices nationwide have dropped 8.7% in the year preceding the report, and were down 1.8% in the last 30 days.
Pricing softness differs from region to region with the Western District weakest and the MountainWest region strongest. Read the report here.
Overall, while the market is weak and prices soft, it is important to realize that housing has not become worthless, its just returned to the value it held in 2005. So don’t panic. Back then those prices seemed amazingly high, and historically they still are.
Get Your Liar’s Loan Done before 2010
In the recent mortgage and housing boom, significant percentages of home loans were originated by independent brokers. As salespeople their interests didn’t always align with the interest of the lender or the borrower. In many cases the drive to “get the loan done”, and the multithousand dollar commissions for doing so influenced brokers and their clients to stretch the truth to qualify. Lenders were just as anxious to create loans they could package and sell. Since the loan was being sold off to an invisible investor, the risk would soon leave the lenders books. Overall it created a tremendous incentive to cheat in ways large and small to get the loans written and placed.
Unfortunately, it is very difficult to underwrite for fraud. The rating agencies judging the quality of the bonds based on these mortgages could easily understand the likelihood of default in a standard marketplace, they didn’t account for the weakness and deceptiveness of the underlying data. Unfortunately there has been no easy way to easily identify trends of loan failures and tie them back to individual participants in the system. Next year that will change. Starting in January 2010 the Office of Federal Housing Enterprise is requiring a system where every participant in the loan origination process will be assigned an id number, and those numbers will be attached to the loan. Once in place the system will allow regulators to look at the aggregate loan performance of any appraiser, broker, banker and identify those whose loans are statistically bad, fraudulent or under-performing.
When combined with more stringent standards for borrowers to prove their actual incomes, the new standards should grind much of the fraud out of the origination process. So if you are gonna cheat, get it over with now.