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Markers of a turn, and The Weekend Poll

When Freddie Mac reported its quarterly measure of home prices for the July-September quarter this week, it wasn't the small increase in purchase prices that caught my eye. What intrigued me was the discrepancy between the two indexes they report. Prices for homes bought in the third quarter increased 0.6 percent compared to the previous quarter in the South Atlantic, which includes the Washington area. But when you add the value of refinancings into the measure, prices fell 2.6 percent.

Both of those measures were worse than the national average. Purchase prices nationally rose 0.9 percent during the third quarter, and they fell 2.1 percent when you include refinancings. It's not surprising that the South Atlantic would do worse than the national average; the region includes Florida, one of the states hardest hit by the foreclosure crisis.

Amy Crews Cutts, deputy chief economist at Freddie Mac, explained the discrepancy between the two indexes. It's a classic hallmark of a market that's stabilizing, she said.

When a borrower applies to refinance a loan, there is no purchase contract involved to reflect current value. Instead, apraisals rely solely on the prices of past transactions to verify today's value, and those values could date back five or six months, when values may have been different, she explained.

"Home price data is very messy," she said. "The only price that's valid is the one negotiated between buyer and seller. After that, the timing becomes an issue."

Despite the continued decline in the purchase-and-refinance index, purchase-only prices have gone up two quarters in a row. "Normally, that kind of separation [between the two indexes] occurs at a turning point," Cutts said.

Weekend Reading: Saturday's Real Estate section introduces us to some people who live alongside the road more traveled. They'll tell us the pros and cons of buying a home on a busy street. Gardening columnist Joel M. Lerner presents the best gardening books of 2009, and legal columnist Benny L. Kass reviews what your liability might be if someone were to slip on your icy sidewalk.

In case you missed it: The Post's Carol Morello has a great story about how Americans are growing more deeply rooted in their communities, mostly because the recession is still it tougher to move around.

The Weekend Poll:

This is a non-scientific user poll. Results are not statistically valid and cannot be assumed to reflect the views of Washington Post users as a group or the general population.

By Elizabeth Razzi  |  December 11, 2009; 12:10 PM ET
Categories:  Poll , Statistics , The economy , The market , Weekend Poll  
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