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FHFA House Price Index Up 0.3%; Comparisons with Case-Shiller

The FHFA's house price ""index"":http://www.fhfa.gov/webfiles/23907/MonthlyHPIFeb1242412.pdf showed a month-over-month increase of 0.3 percent in February on a seasonally adjusted basis and a 0.4 percent increase compared to a year ago in February 2011. This marks the first 12-month gain since the July 2006 - July 2007 yearly increase.

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The FHFA's index still remains 19.4 percent below its April 2007 peak and is roughly the same as the January 2004 index level. The index uses purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.

For the nine FHFA census divisions, Mountain (+1.9 percent), West South Central (1.5 percent), East South Central (1 percent), New England (0.8 percent), and South Atlantic (0.7 percent) posted price gains from January to February, while West North Central (-1 percent), Pacific (-0.7 percent), East North Central (-0.1 percent), and Middle Atlantic (-0.1 percent) saw price decreases.

The ""Case-Shiller index"":http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us, which was also released Tuesday, showed a slight month-over-month increase for February on a seasonally adjusted basis, with home prices rising 0.2 percent for the 20-city composite, and 0.1 percent for the 10-city composite. On a non-seasonally adjusted basis, home prices fell 0.8 compared to January, and on a yearly basis, prices fell 3.6 percent and 3.5 percent for the 10- and 20-city indexes of metropolitan areas.

Patrick Newport, economist with ""IHS Global Insight"":http://www.ihs.com/products/global-insight/index.aspx, pointed out in a report that unlike FHFA indexes, Case-Shiller includes all transactions, and said that Fannie and Freddie mortgages are in much better shape than other mortgages overall.

Considering data on homeowner delinquency levels, the percentage of underwater properties, tight credit conditions, and unemployment, IHS is expecting prices to decline.

""Our view is that foreclosures, excess supply, and weak demand will drive home prices as measured by the Case-Shiller indices down at least another 5 percent,"" said Newport.

With gains showing on a seasonally adjusted basis, Paul Diggle of ""Capital Economics"":http://www.capitaleconomics.com/ said the Case Shiller index supports their view that house prices are just about, or already through, their trough.

""All in all, this morning's flurry of housing market data only serves to reinforce our view that housing market activity will improve slowly this year, while house prices are set to remain broadly flat,"" said Diggle.

About Author: Esther Cho

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