The House Price Index (HPI) is a broad indicator of the movement of single-family housing market prices in the United States. It is an analytical tool for estimating changes in mortgage default, prepayment, and housing affordability rates and an indicator of home price trends.
The House Price Index (HPI): An Overview
The HPI is compiled by the Federal Housing Finance Agency (FHFA) using data from the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation. The HPI is based on single-family mortgage transactions using conventional and conforming loans. It is a weighted repeat sales index that tracks average price changes across multiple repeat sales or refinances on the same properties. An HPI report is published every quarter, but since March 2008, a monthly report has also been published on a regular basis.
The data is compiled using mortgages purchased or securitized by Fannie Mae and Freddie Mac.
What Is the House Price Index (HPI)?
The HPI is one of several economic indicators that investors use to track broader economic trends and potential stock market shifts. The rise and fall of housing values can have significant economic ramifications. Price increases usually lead to more jobs, confidence, and consumer spending. This boosts GDP and overall economic growth by increasing aggregate demand.
When housing market prices fall, the opposite usually happens. Consumer confidence is eroding, and many companies benefiting from the real estate boom are laying off employees. This can occasionally cause an economic slowdown.
How the House Price Index (HPI) Compares to the S&P CoreLogic Case-Shiller HPI
The HPI is not the only way to monitor housing market prices. One of the more well-known alternatives is the S&P CoreLogic Case-Shiller Home Price Indices. These indices employ a variety of data and measurement approaches, yielding a wide range of results. For example, the HPI gives a corresponding weight to all homes, though the S&P CoreLogic Case-Shiller HPIs assign a value to properties.
In addition, unlike the Case-Shiller indices, which only include purchase prices, the HPI includes refinancing appraisals. The HPI also covers a larger geographical area.
The House Price Index Calculator
The FHFA’s HPI calculator can assist you in determining how much your home’s value has increased since you purchased it. When you log in, you will be taken to your home state. Then, choose one of the state’s metropolitan statistical regions. If your specific community is not listed, choose the larger MSA in which your suburb, or town is located.
Then you can specify which quarter you bought your house in. For example, if you purchased in August 2017, you would select the “2017 Quarter 2” option. The next step is to pick the quarter for which you want to estimate the current value of your home, which is usually the most recent data available from the Home Price Index. Enter the purchase price of your home at the time you bought it, then click the “Calculate” button.
The calculator will then tell you how much your home is currently worth and how much its value has increased since you bought it. However, keep in mind that the HPI calculator only provides an estimate. You’ll need to work with a real estate agent or appraise your home to get a more precise value.
Benefits of the House Price Index
The repeated observations of housing values for the same property units aid in accounting for variations in the quality of the houses that comprise the statistical estimation sample. As a result, many people refer to the HPI as a “constant quality” House Price Index. Because the data is derived from two government-sponsored housing enterprises that operate on a national scale, HPI provides extensive geographic coverage. One of the most significant advantages of HPI is that it is an index built using enterprise data.
Like most other measures, a nationwide house price index has some limitations. HPI makes use of data on single-family detached homes that are financed with conforming conventional mortgages. As a result, mortgage transactions on fixed and multi-unit buildings, government loans, and mortgages exceeding the conforming loan limits that determine eligibility for acquisition by Freddie or Fannie are excluded. HPI can be used to identify more repeat transactions in the most recent and previous quarters.
The national house price index is updated quarterly as businesses acquire more mortgages.
