US: FHFA House Price Index

Wed Jan 24 08:00:00 CST 2018

Consensus Consensus Range Actual Previous Revised
M/M change 0.5% 0.3% to 0.6% 0.4% 0.5% 0.6%
Y/Y change 6.5% 6.6% 6.8%

Home prices rose a solid 0.4 percent in November with the year-on-year at 6.5 percent, based on FHFA's house price index. October's monthly rate is revised 1 tenth higher to 0.6 percent with the yearly rate revised 2 tenths higher to 6.8 percent. This index held near the 7 percent rate through much of last year underscoring the strength of the housing market.

The West North Central posted the strongest monthly gain in November at 0.9 percent followed by the South Atlantic at 0.8 percent. The East South Central at minus 1.1 percent and New England at minus 0.1 percent were the weakest. Year-on-year rates are led by the Mountain region at 8.9 percent followed by the Pacific region at 8.6 percent with the Mid-Atlantic at the bottom at plus 4.2 percent. Watch for the existing home sales and early price data on the month of December later this morning at 10:00 a.m. ET.

Market Consensus Before Announcement
Appreciation in home prices was one of 2017's biggest economic stories and the momentum likely continued into November following October's 0.5 percent monthly gain and 6.6 percent yearly gain. Forecasters see the FHFA house price index rising another 0.5 percent in November.

The Federal Housing Finance Agency (FHFA) House Price Index (HPI) covers single-family housing, using data provided by Fannie Mae and Freddie Mac. The House Price Index is derived from transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. In contrast to other house price indexes, the sample is limited by the ceiling amount for conforming loans purchased by these government-sponsored enterprises (GSE). Mortgages insured by the FHA, VA, or other federal entities are excluded because they are not "conventional" loans. The FHFA House Price Index is a repeat transactions measure. It compares prices or appraised values for similar houses.

Home values affect much in the economy - especially the housing and consumer sectors. Periods of rising home values encourage new construction while periods of soft home prices can damp housing starts. Changes in home values play key roles in consumer spending and in consumer financial health. During the first half of this decade sharply rising home prices boosted how much home equity households held. In turn, this increased consumers' ability to spend, based on wealth effects and from being able to draw upon expanding home equity lines of credit.

With the onset of the credit crunch in mid-2007, weakness in home prices has had the reverse impact on the economy. New housing construction has been impaired and consumers have not been able to draw on home equity lines of credit as in recent years. But an additional problem for consumers is that a decline in home values reduces the ability of a home owner to refinance. During 2007, 2008, and into 2009 this became a major problem for subprime mortgage borrowers as adjustable rate mortgages reached the end of the low, "teaser rate" phase and ratcheted upward. Many subprime borrowers had bet on higher home values to lead to refinancing into an affordable fixed rate mortgage but with home equity values down, some lenders balked at refinancing subprime borrowers.