HPI : U.S. House Prices Rise 1.1% In Q2

by Ike Obudulu Posted on August 23rd, 2018

Washington, D.C., USA: U.S. house prices rose 1.1 percent in the second quarter of 2018 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI). House prices rose 6.5 percent from the second quarter of 2017 to the second quarter of 2018.

FHFA’s seasonally adjusted monthly index for June was up 0.2 percent from May. Economists had expected the index to inch up 0.3%

The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.

“Home prices rose in the second quarter but at a slower pace than we have seen for the past four years,” said Dr. William Doerner, Supervisory Economist. “Mortgage rates have increased by more than half a percentage point over the first six months of the year. Rates are still inexpensive from a historical standpoint, but their bump-up appears to have gently pressed the brakes on house price increases.”

Significant Findings

  • Home prices rose in all 50 states and the District of Columbia between the second quarter of 2017 and the second quarter of 2018. The top five areas in annual appreciation were: 1) Nevada 17.0 percent; 2) Idaho 13.0 percent; 3) District of Columbia 11.8 percent; 4) Utah 11.3 percent; and 5) Washington 11.0 percent. The states showing the smallest annual appreciation were: 1)North Dakota 2.1 percent; 2) Louisiana 2.3 percent; 3) West Virginia 2.3 percent; 4) Connecticut 2.4 percent; and 5) Alaska 2.6 percent.
  • Home prices rose in 99 of the 100 largest metropolitan areas in the U.S. over the last four quarters. Annual price increases were greatest in Las Vegas-Henderson-Paradise, NV, where prices increased by 18.8 percent. Prices were weakest in El Paso, TX,where they fell by 0.03 percent.
  • Of the nine census divisions, the Mountain division experienced the strongest four-quarter appreciation, posting a 9.5 percent gain between the second quarters of 2017 and 2018 and a 1.9 percent increase in the second quarter of 2018. The Pacific division, which often records the strongest numbers in the country, only had a quarterly appreciation of 0.6 percent, its slowest quarterly increase since 2011. Annual house price appreciation was weakest in the West South Central division, where prices rose 5.0 percent between the second quarters of 2017 and 2018.

Tables and graphs showing home price statistics for metropolitan areas, states, census divisions, and the U.S. as a whole are included on the following pages.

Highlights Article: Price Indexes for Manufactured Homes

This quarter’s release includes a Highlights article that discusses a set of newly constructed house price indexes for manufactured homes. These indexes, which are experimental in nature, could provide useful information to market observers and policy makers engaged in analyzing affordable housing issues.

Other Price Indexes

Most statistics in the quarterly house price index report reference price changes computed by FHFA’s basic “purchase-only” HPI. In some cases, however, the reported statistics reference alternative price measures. FHFA publishes three additional house price indexes beyond the basic “purchase-only” series. Although they use the same general methodology, the three alternatives rely on slightly different datasets as follows:

  • “Distress-Free” house price index. Sales of bank-owned properties and short sales are removed from the purchase-only dataset prior to estimation of the index.
  • “Expanded-Data” house price index. Sales price information sourced from county recorder offices and from FHA-backed mortgages are added to the purchase-only data sample. This index is used annually to adjust the maximum conforming loan limits, which dictate the dollar amount of loans that can be acquired by Fannie Mae and Freddie Mac.
  • “All-Transactions” house price index. Appraisal values from refinance mortgages are added to the purchase-only data sample.

Data constraints preclude the production of all types of indexes for every geographic area, but multiple index types are generally available. For individual states, for instance, three types of indexes are available. The various indexes tend to correlate closely over the long-term, but short-term differences can be significant.

Background

FHFA’s HPI tracks changes in home values for individual properties owned or guaranteed by Fannie Mae or Freddie Mac over the past 43 years using more than eight million repeat transactions. The “repeat-transactions” methodology constructs index estimates by statistically evaluating price appreciation (or depreciation) for homes with multiple values over time.

Why Markets Care About FHFA House Price Index (HPI)

The FHFA House Price Index (HPI) is a broad measure of the movement of single-family house prices.  It measures change in the purchase price of homes with mortgages backed by Fannie Mae and Freddie Mac.

The HPI 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.

The HPI serves as a timely, accurate indicator of house price trends at various geographic levels. Because of the breadth of the sample, it provides more information than is available in other house price indexes. It also provides housing economists with an improved analytical tool that is useful for estimating changes in the rates of mortgage defaults, prepayments and housing affordability in specific geographic areas.

The HPI includes house price figures for the nine Census Bureau divisions, for the 50 states and the District of Columbia, and for Metropolitan Statistical Areas (MSAs) and Divisions.

FHFA House Price Index (HPI) is a leading indicator of the housing industry’s health because rising house prices attract investors and spur industry activity. The usual effect s that ‘Actual’ greater than ‘Forecast’ is good for the dollar and vice versa.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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