| Actual | Previous | |
|---|---|---|
| Month over Month | 0.7% | 0.7% |
| Year over Year | 2.8% | 3.1% |
Highlights
The FHFA house price index for May is up 0.7 percent compared to April and up 0.7 percent in April compared to March. The index is up 2.8 percent from May 2022. While the price of existing homes and valuation of homes for refinancing is up on a month-over-month basis since January, the annual pace of increases is the slowest since up 2.8 in May 2012.
Prices for existing homes continue to be competitive. Demand for homes to buy is robust during a period when mortgage interest rates backed off some of the near term peaks in the fall and when consumers anticipated higher rates in the near future. While prices remain elevated, a comparatively cooler market from a year ago means those homebuyers who can qualify for a loan are seeing fewer bidders on the more sought-after properties.
Prices for existing homes continue to be competitive. Demand for homes to buy is robust during a period when mortgage interest rates backed off some of the near term peaks in the fall and when consumers anticipated higher rates in the near future. While prices remain elevated, a comparatively cooler market from a year ago means those homebuyers who can qualify for a loan are seeing fewer bidders on the more sought-after properties.
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.
