The OFHEO found that actual housing appreciation in metropolitan Phoenix-Mesa-Scottsdale, AZ was up 9% from the 4th quarter of 2005 to the 4th quarter of 2006.

On the other hand, the ASU data that I present monthly (example here) showed that the median home price in Greater Phoenix increased only 1% from January 2006 to January 2007.

Why the big difference?

APPRECIATION. The OFHEO data is the better data. They calculate actual housing price appreciation by looking at prices for the same home over time.

The HPI [Housing Price Index] is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties. This information is obtained by reviewing repeat mortgage transactions on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975.

MEDIAN HOME PRICE. The median home price doesn’t calculate changes in the value of individual homes. The median price is the “middle” price of homes sold. If 5 homes sold at $100,000, $120,000, $200,000, $250,000 and $1,000,000, the median price would be $200,000. Its the “middle” price.

Median home price data is available monthly which is great but one big problem with median home prices is that they can change when the actual home prices don’t.

For example, if for some reason a greater percentage of inexpensive homes are selling, the median home price will fall even though home prices haven’t changed at all. On the other hand, if the high end home market takes off for some reason, the median home price will increase even if the actual home prices haven’t changed at all.

In fact, median home prices tend to over-estimate appreciation during an up market and, like right now, they tend to under-estimate appreciation in a down market.

That suggests that lower priced homes are selling better than more expensive homes now. That makes sense. And that would explain why appreciation for Phoenix-Mesa-Scottsdale was up 9% while the median home price for Greater Phoenix was up only 1%.

P.S. Don’t expect appreciation in 2007 to be anywhere close to 9%. Most of that 9% occurred during the first half of 2006.