Home Price Index

Home Prices Still On The Rise

As reported by the government, home prices are rising nationwide, up 0.3 percent in July.

Furthermore, versus November 2008, the Home Price Index has clawed back to unchanged.

The housing market appears to be holding its own.

However, we have to be careful about putting our full faith in the Federal Housing Finance Agency’s data.  It’s somewhat flawed.

1. The Home Price Index is a national statistic and all real estate is local
2. The Home Price Index’s methodology specifically excludes key housing demographics

As an obvious example, HPI only accounts for homes with Fannie Mae- or Freddie Mac-backed mortgage. Lately, the percentage of homes meeting that description is shrinking. 

As FHA financing rises in popularity, Fannie and Freddie back far fewer loans than in the past.  Furthermore, the HPI sample set also excludes newly-built homes and multi-unit properties.

Because of these exclusions, some analysts call the HPI incomplete.  The same could be said of all home price metrics, however – including the venerable Case-Shiller Index.

Therefore, what should be of interest to today’s buyers and sellers is that all of “popular” home valuation models seem to be telling the same story - home prices have stopped falling and look like they’re beginning to rebound.

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Home Price Index

The Home Price Index Shows That Home Values Increased In May

Home values around the country appear to be leveling.

The Federal Housing Finance Agency’s latest Home Price Index report shows values up by nearly 1 percent in May versus the month prior.

Since peaking in April 2007, values remain off by 11 percent nationwide.

The FHFA Home Price Index is an interesting metric.  Different from the Case-Shiller Index which collects data from just 20 U.S. markets, the Home Price Index reflects every U.S. home that backs a mortgage sold to Fannie Mae and Freddie Mac.

In this sense, the FHFA Home Price Index is more “national” than the Case-Shiller Index but the HPI has its flaws, too. 

The House Price Index specifically excludes from its measurements the sales price on any home purchase with any of following traits:

1. Is new home construction
2. Is a multi-unit property
3. Is financed by an entity other than Fannie Mae or Freddie Mac

Because of these exclusions, some analysts say the report is incomplete.  The same could be said of every method of home valuation, however. 

Therefore, what’s most important to today’s home buyers and sellers is that each of the “popular” home valuation reports shows similar patterns.  Home prices appear to have stopped falling and may be even starting to recover.

It won’t be for a few years that we’ll be able to look back and point to the exact month that real estate bottomed. Nevertheless, considering how the data has presented as of late, it’s reasonable to think that we’ve already hit it.  Certainly, that’s what the Home Price Index suggests. 

For a region-by-region breakdown of the Home Price Index, visit the FHFA website.

Home Price Index

How Improving Home Values May Lead To Easier Mortgage Approvals

If falling home values is what prompted Fannie Mae and Freddie Mac to tighten mortgage guidelines in 2007 and 2008, America’s mortgage applicants may get their long-awaiting loosening within the next 18 months.

According to a government report, the values of homes financed with conforming mortgages rose for the third straight month in February.

This is an important piece of data because as values rise on the homes against which conforming mortgages are made, Fannie Mae and Freddie Mac’s respective loan portfolios get less risky.

With less risk related to home values, there’s an opening for the agencies to assume more risk on individual borrowers.

A guideline loosening would help home loan applicants that currently find themselves ineligible for conforming mortgage financing — often the least costly source for mortgage money.

Pressed for profitability, it’s unlikely that Fannie Mae or Freddie Mac will loosen their respective guidelines prior to 2010, but if the Home Price Index continues to show improvement, it’s good news for the agencies which, in turn, is good news for people in want of a home loan.

HPI shows February 2009 home values on par with the values of April 2005.

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