We saw another "battle of the warring housing price indexes" last week, with the federal government reporting positive price appreciation in more than two-thirds of U.S. metropolitan markets -- at the same time a widely-publicized Wall Street index said home values were down by a record 4 percent for the year, and down by 5 percent in the top 20 markets.

How could there be such big differences? And which index is right?

Here are the facts:

The federal government's house price index is produced quarterly by an agency called OFHEO. It measures valuation movements in a massive database of millions of homes whose loans were financed or refinanced by Fannie Mae or Freddie Mac.

The data covers nearly 300 major metropolitan markets and dozens of smaller non-metropolitan areas.

In its latest index, released November 29, OFHEO reported prices in some California and Florida markets down by 10 percent or more during the year. But it also found average price GAINS of 13 percent in the state of Utah, 12 percent in Wyoming, and 7 percent or higher in Montana, New Mexico, and Washington.

Plus it reported stable prices or modest gains in 204 of 287 cities, declines in 83, and an average national appreciation rate of 1.8 percent for the 12 months covered by the study.

Compare those numbers with the Standard & Poor's/Case-Shiller study that was released the same week. It found prices DOWN in 15 of the top 20 real estate markets -- an 11 percent decline for Tampa, 10 percent for Miami and 9.6 percent for San Diego. Overall, according to Case-Shiller, average home values dropped by 5 percent for the 12 month period.

What's going on here? For starters, the two surveys are measuring very different things-even if news reports don't bother to tell you that. The Case-Shiller index has no data whatsoever from 13 states and incomplete data from 29 states. It does not cover condominiums or refinancings … but it does cover houses with subprime and jumbo loans.

The OFHEO study covers every state -- and that's very important because some of the strongest state and local housing markets today are in areas missed or incompletely covered by Case-Shiller.

But the OFHEO numbers have their own limitations-minimal coverage of houses with subprime mortgages, no jumbo loans and no FHA.

Both indexes are probably technically "correct" -- but they are not looking at the same houses or even the same local markets.

More importantly, neither of them will tell you the value change of a specific house in a specific neighborhood during a specific period of time.

For that, you need to consult a local real estate specialist-a realty agent, broker or appraiser who tracks price movements every day of the week.

Published: December 7, 2007

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.