Washington, D.C., USA: U.S. house prices rose in May, up 0.2 percent from the previous month, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI) data released today. The previously reported 0.1 percent increase in April was revised upward to 0.2 percent.
Economists had expected the index to inch up 0.4%.
The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. From May 2017 to May 2018, house prices were up 6.4 percent.
For the nine census divisions, seasonally adjusted monthly price changes from April 2018 to May 2018 ranged from -0.6 percent in the East North Central division to +1.5 percent in the East South Central division. The 12-month changes were all positive, ranging from +4.9 percent in the West South Central division to +9.1 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.
Other Economy News: U.S. Services PMI or Purchasing Managers’ Index
An index measuring U.S. service-sector activity eased as companies worked through their backlogs while facing higher costs.
The IHS Markit U.S. Services Business Activity Index fell to 56.2 in July from 56.5 the month prior in a reading that met analyst expectations.
According to an IHS Markit report, backlogs of work fell for the first time since April 2017. The report highlighted weaker hiring and higher costs, particularly fuel prices. In response, companies charged more in what the report described as a “sharp and accelerated rise” in prices.
The U.S. Services PMI or Purchasing Managers’ Index, is derived from a survey of senior purchasing executives at more than 400 companies based in the U.S. service sector.
The IHS Markit U.S. Composite PMI Output Index, which combines data from the services and manufacturing PMI, fell to 55.9 in July from 56.2 in June. The manufacturing index rose to 55.5, above the 55 expected by analysts.
The U.S. Services PMI or Purchasing Managers’ Index is a leading indicator of economic health – businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy;