A team of economists who created a variety of forecasting models concludes that predictions of further large housing price declines are greatly overblown.

They point to the house price index of the Office of Federal Housing Enterprise as most reflective of reality. Its data reveals that only four states — Arizona, California, Florida, and Nevada — have had declines of more than 4 percent in home prices over the past year.

These economists, including professors from Columbia University and from the Center for Real Estate at Wichita State University in Kansas, discount more drastic figures from the Standard & Poor’s/Case-Shiller housing price index. They say this index is faulty because it doesn’t include data from 13 states and offers only partial coverage of 29 others, making its results an inaccurate reflection of middle-market homeownership.

Using a model constructed from the OFHEO price index, foreclosures, home sales, permits and employment, the economic team concluded that declines in house prices are highly likely to remain small.

Source: Housing Declines to Remain Small – By Charles W. Calomiris, Stanley D. Longhofer and William Miles, The Washington Post, by way of Realtor.org

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