Economists from the Federal Housing Finance Agency recently examined markets in Miami and Tampa, FL to determine the impact of bank-owned property and short sales on the FHFA’s house price index. The latest data, released July 23, showed that house prices appreciated a seasonally adjusted 0.7% in May from the prior month — the 16th consecutive increase. The report reinforced views that the housing market is rebounding, but it also points to some distortion in the index through boom-and-bust cycles.
The study revealed that, “As the ‘weight’ of distressed sales on the standard index decreased in recent periods, the depressing effect lessened over time. This means that the price appreciation observed in the standard FHFA index was somewhat above what the distress-free measures reported.”
In the late 1990s, distressed sales in the Miami and Tampa markets tended to price about 10%-15% less than normal sales. As the housing boom accelerated, the discount shrank to 5% and 10%. But from 2007 to 2010, that figure jumped to near 30%. In recent quarters, with the onset of the recovery and rising home prices, such discounts have become slightly more modest. In the first quarter of 2013, the average discount was about 25%, the study reported.
Click here to read more on a new study which reveals foreclosures distort home-price measure.
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