FHFA HPI

The Federal Housing Finance Agency (FHFA) release of their monthly purchase-only house price index (HPI) shows house prices remaining relatively stable (marginal decrease of 0.26%) at an index value of 195.2 (seasonally adjusted) in June, while the quarterly index showed an increase of 0.9% to 194.3 (SA). Following a steep decline in 2007 and 2008, prices have generally stabilized over the past 18 months (despite monthly volatility), remaining within a relatively narrow band between 192 and 202. 

The FHFA purchase-only HPI is calculated using the purchase price of houses back by mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac, which in the current market represents more than 90%of all new mortgages. 

The monthly report presents the monthly price changes for the nine census divisions. The greatest declines on a seasonally adjusted basis were observed in the Pacific (-2.09%) and Mountain (-1.96%) divisions, which are dominated by states experiencing the weakest economic conditions and most affected by the housing market downturn (California, Arizona and Nevada).  Divisions experiencing the greatest increases were East South Central (+1.35%) and New England (+0.6%) divisions.

The monthly HPI numbers for June show a slight (0.26%) decline on a seasonally adjusted basis, but a slight rise (0.28%) on a not seasonally adjusted basis. A similar divergence appears in earlier periods and in the Case-Shiller HPI. Generally, there is greater home sales activity in the summer months than the winter months, so the seasonal adjustment process lowers the summer numbers and raises the winter numbers to compensate for the seasonal variation in activity.  However, the adjustment factors are based on the seasonal changes in activity over several previous years, and may not be appropriate at present given the unique state of the current market. Thus, the not seasonally adjusted numbers are a better indicator of the house price trend in the current market.

The trend in FHFA HPI is consistent with the trends observed in other house price measures, with the Case-Shiller 20 index and the National Association of Realtors, median house price values showing house prices as stable or slightly improving over the past 12 months.

HPIs