Washington, D.C., USA: U.S. house prices rose in August, up 0.3 percent (matching expectations) from the previous month, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI). The previously reported 0.2 percent increase in July was revised upward to 0.4 percent.
The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. From August 2017 to August 2018, house prices were up 6.1 percent.
For the nine census divisions, seasonally adjusted monthly price changes from July 2018 to August 2018 ranged from -0.7 percent in the Middle Atlantic division to +0.8 percent in the Pacific division. The 12-month changes were all positive, ranging from +4.0 percent in the Middle Atlantic division to +8.4 percent in the Mountain division.
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.