Index Series Shows Severity of Home Price Decline Lessening

One series of a Freddie Mac index based on purchase transactions shows conventional home prices ended 2009 with a much smaller small year-to-year decline than was seen in 2008. Freddie's purchase-only series of its conventional home price index inched down 0.4% from the fourth quarter of 2009 from the same period in 2008, compared to a 9.5% drop in home prices during 2008. Between the third and fourth quarter of 2009, the U.S. index registered a 1.4% decline on an unadjusted basis. "We normally see a seasonal effect in the fourth quarter price index that reduces its value. A year-over-year comparison largely controls for this," said Freddie Mac chief economist Frank Nothaft. During 2009, "four-of-nine regions posted price gains, with the Pacific region showing a third consecutive quarterly gain as well as an annual increase in prices," he said. Another series of Freddie's conventional home price index that also includes data from appraisals from refinance deals shows typical U.S. home values depreciated 2.3% during 2009. This "classic" series shows average home values falling 0.7% in the fourth quarter of last year. "Generally, because appraisals are backwards looking through the use of recent comparable property transactions, the classic series will typically lag changes in the purchase-only series," Freddie Mac said.