Detailed Definition
The FHFA House Price Index (HPI) is a measure of the movement of single-family house prices across the United States. It is maintained by the Federal Housing Finance Agency (FHFA) and provides insights into housing markets using data sourced from loans held by the Government-Sponsored Enterprises (GSEs), specifically Fannie Mae and Freddie Mac. This index tracks the purchase prices of homes and their subsequent movement, highlighting trends over periods.
Due to its reliance on GSE data, the FHFA HPI typically does not include the highest-value homes as these are often beyond GSE loan limits. This differentiation can result in the FHFA HPI showing less volatility compared to other price indices like the Case-Shiller/S&P Home Price Index, which requires repeat sales of the same properties.
Examples
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National Level Understanding:
Suppose the national FHFA HPI reports a 5% increase over the past year. This indicates that single-family house prices, on average nationally, have appreciated by 5%.
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Regional Analysis:
For instance, the FHFA HPI shows a 3% increase for California and a 4.5% increase for the San Francisco metropolitan area over the same period. This data helps stakeholders understand the disparities in house price movements across regions.
Frequently Asked Questions (FAQs)
1. How often is the FHFA House Price Index (HPI) updated?
The FHFA HPI is updated monthly and quarterly. The monthly index provides updated national and census division level data, while the quarterly reports offer more exhaustive insights with state and metropolitan level breakdowns.
2. Why does the FHFA HPI tend to show less volatility compared to other indices?
The FHFA HPI tends to be less volatile because it exclusively uses data from conforming loans made by GSEs, which caps the loans at certain limits, often excluding extremely high-priced homes. This results in steadier data compared to the broader spectrum of home sales used in other indexes, such as the Case-Shiller/S&P Index.
3. Can the FHFA HPI be used to determine individual home values?
No, the FHFA HPI is better suited for analyzing broad market trends rather than evaluating individual property values. Real estate professionals typically rely on localized appraisals for individual property valuations.
4. What properties are excluded from the FHFA HPI?
The FHFA HPI excludes high-value properties that exceed GSE loan limits, non-GSE compliant loans, and non-single-family homes like multi-family properties, condos, or commercial real estate.
Related Terms
1. Case-Shiller Index: The Case-Shiller Home Price Indices track changes in property prices across 20 metropolitan regions in the U.S. by analyzing repeat sales of the same houses.
2. Government-Sponsored Enterprise (GSE): A group of financial services corporations created by the U.S. Congress to enhance credit flow in specific sectors of the economy, including the housing market.
3. Home Price Index (HPI): A measure designed to track changes in the price of residential properties over time, which can provide insights into general market trends.
Online Resources
- Federal Housing Finance Agency (FHFA) HPI Page
- Case-Shiller Home Price Indices
- National Association of Realtors (NAR)
References
- “FHFA House Price Index (HPI): Monthly Update”, Federal Housing Finance Agency, fhfa.gov
- “Understanding Real Estate Markets Using Housing Price Indices”, U.S. Bureau of Economic Analysis, bea.gov
- Ruth Simon and Rachael Levy, “How the FHFA House Price Index Is Changing Real Estate Analysis”, The Wall Street Journal, April 2020.
Suggested Books for Further Studies
- “Real Estate Market Analysis: Methods and Case Studies” by Deborah L. Brett and Adrienne Schmitz.
- “Modern Real Estate Practice” by Fillmore W. Galaty, Wellington J. Allaway, and Robert C. Kyle.
- “Real Estate Principles: A Value Approach” by David C. Ling and Wayne R. Archer.
