Tuesday, March 24, 2009

Housing Prices Increase 1.7 percent in One Month

The seasonally OFHEO housing price index increased 1.7 percent from December 2008 to January 2009 (+1.5 percent seasonally unadjusted).

So much for yesterday's "Housing prices plunge headline"!

For a while I have been saying that the housing market -- housing prices and construction -- would hit bottom in early 2009 and housing construction would be pretty normal by summer:

It is helpful to compare the purchase price for a house to the cost of construction, because the higher is the former relative to the latter, the greater the incentive to build more houses. The chart below shows the monthly OFHEO housing price index compared to the PPI for residential construction: January 2009 is above every single month since July 2008!

You have to dig to find a headline on this, but here's one from AP "Home prices post 6.3 pct annual decline in January". Notice that the reporter is looking at the same data as shown above, but apparently needs a bad news headline in order to collect his/her paycheck, so that's what you get.


buermann said...

Copy editors write AP headlines, not reporters.

Who writes yours? The FHFA's report says their sample is biased as recorded sales "disproportionately occurred in areas with the strongest markets".

AFS1981 said...

Dear Prof. Mulligan, thanks for writing this. I'm the business/finance writer for the NYC news start-up findingDulcinea.com, where I recently launched a column titled "Chin Up in the Downswing" featuring positive news in the recession: http://is.gd/qbsO I linked to your Seeking Alpha article on the 24th. BTW, I'm also a U of C alumna. :)

Gprofessionals said...

Anybody can be mistaken by analyzing the graph. But the picture of home prices were totally different and which proved all experts wrong once again when after few days the home prices again started to move down.
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