Latest Oregon Economic Forecast Projected Home Price Changes Are Overstated.

Buried in the most recent State of Oregon Economic Forecast HERE (MS Excel) are assumptions about the direction of home sale prices for Oregon. (The economic forecast uses a Freddie Mac repeat conventional purchase index to project/track Oregon home sales price changes).

The forecast projection is that the price index will increase by 3.9% in 2007, 2.8% in 2008, and 4.3% in 2009, (comparing first quarter 2008 vs first quarter 2007 etc).

However, index data already available show that the 2007 projected index increase is likely overstated. This 2007 shortfall then calls into question the projected increases in 2008 and 2009, particularly when the forecast also projects significant continuing declines in national median sales prices for those periods.

2007 Analysis

• The projected 2007 index increase for quarters two and three totals 2.5%; the actual increase was 2.32 for those two quarters,using the (MS Excel) state index actual data found HERE.
• The actual third quarter index increase was .44% instead of the projected .74% increase--that's a 41% shortfall in the most recent quarter. (To be fair, the second quarter actual increase exceeded the forecast projection, 1.88% vs a projected 1.72%).
  
• Given the slow down in the actual rate of increase in the third quarter, the projected 4th. quarter increase of an additional .8% seems overstated as does the projected increase of .6% in the first quarter of 2008.
• With all this, I conclude that the projected index increase from 1st quarter 2007-first quarter 2008 of 3.9% is clearly overstated. In my mind this calls into serious question the likelihood of the continuing significant increases projected for 2008 and 2009.

(While it seems clear to me that future forecast home price increases are overstated, the impact that lower sales price increases (OR decreases) will have on the revenues included in the economic forecast is not direct and is not known).