Craig P. Aubuchon

David C. Wheelock

English

Research Papers in Economics

August 2008 NationalEconomicTrends
Views expressed do not necessarily reflect official positions of the Federal Reserve System.
H
ouse prices in the United States were 14.1 percent
lower in the first quarter of 2008 than they were a
year earlier, according to a widely cited measure of
U.S. house prices, the S&P/Case-Shiller (S&P/CS) National
Home Price Index. However, another widely cited measure,
the Office of Federal Housing Enterprise Oversight (OFHEO)
house price index, based solely on purchases, indicated house
prices were down a mere 3.1 percent. Still other measures indi-
cate different declines in U.S. house prices, although most lie
between the S&P/CS and OFHEO indices.
Measures of U.S. house prices are constructed using a vari-
ety of data and methods, which explains the reported differences.
The S&P/CS and the OFHEO indices are “repeat sales” indices,
which control for changes in the average quality of houses over
time by tracking changes in the prices of houses sold more than
once. Both indices also are designed to show nationwide house
price trends. Nevertheless, as the chart shows, the two indices
have diverged widely over the past decade. The S&P/CS index
indicated a more rapid rise in U.S. house prices during 1998-
2006 than did the OFHEO index; it also showed a more rapid
decline in house prices during 2007-08.
The OFHEO index tracks the sales prices
of houses financed with conforming, conven-
tional mortgages purchased by Fannie Mae
and Freddie Mac. In 2007, conforming loans
were limited to a maximum of $417,000.
Home purchases involving larger, “jumbo”
mortgages, or unconventional mortgages—
including many subprime mortgages—do
not influence the OFHEO index. By con-
trast, the S&P/CS index is based on trans-
action information reported by county
assessors and recorder offices; it includes
data on houses financed by jumbo mort-
gages, subprime mortgages, and home pur-
chases that do not involve a mortgage.
The S&P/CS index is also value weighted:
More expensive homes have relatively
greater influence on the index, whereas the
OFHEO index is unit weighted. Further  -
more, the S&P/CS index assigns greater
weight to census regions with greater total
residential real estate value. The OFHEO
index, by contrast, weights regions based
on the number of residential units. Hence, regions with relatively
higher average home prices have more influence on the S&P/CS
index than on the OFHEO index.1
The S&P/CS index exhibited faster growth in house prices
before 2006 because house prices rose more rapidly in the
regions with more influence on that index. These regions also
tended to have a higher percentage of transactions involving
mortgages ineligible for purchase by Fannie Mae and Freddie
Mac. The relatively rapid decline in house prices since 2006
in the West and East Coast regions, and the relatively greater
weight given these regions in the S&P/CS index help explain
why the S&P/CS index shows a more rapid decline in house
prices for the United States as a whole.
—Craig P. Aubuchon and David C. Wheelock
1 Both Standard & Poor’s and OFHEO maintain multiple house price indices,
including regional indices, indices for large metropolitan areas, and indices
based on different types of house transactions. See www2.standardandpoors.com/
for additional information about S&P/Case-Shiller Home Price Indices, and
www.ofheo.gov/hpi.aspx for information about home price indices produced
by OFHEO.
research.stlouisfed.org
How Much Have U.S. House Prices Fallen?
U.S. Home Price Indices
Year-to-Year Percent Change 
–20
–15
–10
–5
0
5
10
15
20
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Percent
OFHEO Purchase Only Index
S&P Case-Schiller Index
2008:Q1
–14.1%
2008:Q1
–3.07%

How much have U.S. house prices fallen?

http://research.stlouisfed.org/publications/net/20080801/cover.pdf

How much have U.S. house prices fallen?

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