| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Month over Month | -0.3% | -0.4% to -0.2% | -0.1% | -0.1% | |
| Year over Year | 6.6% | 8.2% | 8.3% |
Highlights
The FHFA house price index is down 0.1 percent in December from November and up 6.6 percent compared to a year ago. The December reading is above the consensus of down 0.3 percent in an Econoday survey. The index change reflects further moderation in the valuation of home resales and refinancing as mortgage-rate increases have put downward pressure on home prices to improve affordability for buyers. The year-over-year price increase is the smallest since up 6.0 percent in June 2020.
The data are consistent with a shift from a sellers' market for houses a year ago to one in which buyers have greater power to negotiate prices. Those who refinance are doing so while their home values remain elevated, and possibly to catch a dip in mortgage rates from the peaks seen back in September, October, and November 2022.
The data are consistent with a shift from a sellers' market for houses a year ago to one in which buyers have greater power to negotiate prices. Those who refinance are doing so while their home values remain elevated, and possibly to catch a dip in mortgage rates from the peaks seen back in September, October, and November 2022.
Market Consensus Before Announcement
The house price index had flattened out, coming in unchanged or marginally changed the last three reports. But December's consensus is a tangible monthly fall of 0.3 percent.
Definition
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.
Description
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 dampen housing starts. Changes in home values, and the ability to draw upon expanding lines of home equity loans, play key roles in consumer spending and in consumer financial health.
Beginning with the onset of the subprime credit crunch in mid-2007 and with it a downturn in home prices, the ability of borrowers to refinance their debt into affordable fixed rate mortgages was sharply constrained. This in turn limited aggregate consumer spending and contributed to the depth of the Great Recession. From its peak in 2007 to its nadir in 2011, FHFA's house price index fell nearly 30 percent. The subsequent recovery proved slow but steady with the index finally surpassing its prior highs in 2016.
Beginning with the onset of the subprime credit crunch in mid-2007 and with it a downturn in home prices, the ability of borrowers to refinance their debt into affordable fixed rate mortgages was sharply constrained. This in turn limited aggregate consumer spending and contributed to the depth of the Great Recession. From its peak in 2007 to its nadir in 2011, FHFA's house price index fell nearly 30 percent. The subsequent recovery proved slow but steady with the index finally surpassing its prior highs in 2016.
