Columbia housing values declining, according to federal designation

       The Columbia metropolitan area has been designated a declining real estate market by the federal government’s Housing Price Index, which affects how local lenders determine mortgage rates and policies and can increase down-payment requirements.
       Columbia was ranked 202nd in housing appreciation out of 291 Metropolitan Statistical Areas and was the only declining MSA in Missouri, according to the Office of Federal Housing Enterprise Oversight’s Housing Price Index (HPI). 
       In the fourth quarter of 2007 compared with the same quarter the previous year, the HPI in Columbia fell three-quarters of 1 percent. This is one of only a few quarterly declines in the past 20 years and apparently is the first time that Columbia has had the declining market designation. 
       The HPI is used by Freddie Mac and Fannie Mae, the government sponsored enterprises (GSE) that buy the bulk of U.S. mortgages and have widespread influence on how home loans are structured. The HPI measures average price changes in repeat sales or re-financings on the same properties whose mortgages have been purchased or scrutinized by Freddie Mac or Fannie Mae.
       The designation relayed to lenders last week is particularly problematic for first-time home buyers because it makes purchases less affordable, Carol Van Gorp, head of the Columbia Board of Realtors, told the CBT on Wednesday.
       “It’s a really big deal because it hurts the segment of the market that can least afford to bear this burden,” Van Gorp said. The CBOR doesn’t believe the designation is warranted because both median and average home sale prices rose in Columbia in the fourth quarter of 2007 and continue to rise this year, she said.
       Anyone applying for a loan connected to the GSEs with less than a 20 percent down payment will have to put down 5 percent more than they would in a non-declining market. In other words, if a buyer qualifies for a maximum 95 percent loan-to-value ratio, they would only be able to finance 90 percent because of the designation.
       Nationwide, home prices fell 1.3 percent in the fourth quarter of 2007, according to the federal housing agency. The quarterly report analyzing housing price appreciation trends found that 192 MSAs had positive fourth-quarter appreciation and 99 had price declines, including Columbia.