fedgazette Roundup (2011-2015)

District housing values: A man’s home is his … certificate of deposit?

Ronald A. Wirtz | Editor, fedgazette | @RonWirtz

Published May 31, 2012

If you’re not tired yet of reading about how much value your home has lost, here’s a new way to think about it—at least for long-time owners.

The Federal Housing Finance Agency—the regulator for Fannie Mae and Freddie Mac—tracks housing values on a quarterly basis using average price changes in repeat sales or refinancings of the same single-family properties whose mortgages have been purchased or securitized by Fannie or Freddie since 1975.

The most recent FHFA data show that statewide housing values in the first quarter of 2012 inched up in the Dakotas and Montana compared with a year earlier, and were flat in Minnesota and Wisconsin (see Chart 1; note that index values are not adjusted for inflation).

Housing index chart 1 -- 5-30-12

Of course, any statewide index comes with many caveats, the most notable of which is the old real estate saying about location, location, location—certain places have seen more dramatic price swings leading into and out of the recession. Minnesota’s four metro regions have experienced different home appreciation rates over the past two decades, but they follow the same directional path (see Chart 2, at bottom).

But on par, despite significant declines since the recession, housing values over the course of the past two decades are still quite positive, having at least doubled in every district state since 1991, with Montana’s average home value nearly tripling. In terms of annual price appreciation, 20 years is a long maturity. Over this period, compound annual home appreciation runs about 3.5 percent in Minnesota and Wisconsin, 4.4 percent in the Dakotas and 5.5 percent in Montana.

The Dakotas continue to illustrate the tortoise-and-the-hare lesson in real life; having lagged home values in neighboring states, their steady performance and lack of any notable price depreciation has allowed them to catch up and surpass many states, including Minnesota and Wisconsin.

Housing index chart 2 -- 5-30-12