U.S. House Prices Rise 1.2 Percent in Second Quarter; Some Signs of Deceleration

From the Federal Housing Finance Agency:

U.S. house prices rose 1.2 percent in the second quarter of 2016 according to the Federal Housing Finance Agency House Price Index. House prices rose 5.6 percent from the second quarter of 2015 to the second quarter of 2016. Federal Housing Finance Agency’s seasonally adjusted monthly index for June was up 0.2 percent from May. The House Price Index is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. Federal Housing Finance Agency has produced a video of highlights for this quarter.

“Although the appreciation rate for the second quarter was of similar magnitude to what we’ve been seeing for several years now, a close look at the month-over-month price changes during the quarter reveals a potentially significant market shift,” said Federal Housing Finance Agency Supervisory Economist Andrew Leventis. “Our monthly price index indicates that in each of the three months of the quarter, the increase was only 0.2 percent. This is a much more modest pace of appreciation than we’ve seen in some time and most likely reflects accumulated pressures from significantly reduced home affordability,” Leventis said.

While the House Price Index rose 5.6 percent from the second quarter of 2015 to the second quarter of 2016, prices of other goods and services were nearly unchanged. The inflation-adjusted price of homes rose approximately 5.7 percent over the last year.

Significant Findings

• Home prices rose in every state except Vermont between the second quarter of 2015 and the second quarter of 2016. The top five states in annual appreciation were: 1) Oregon 11.7 percent; 2) Washington 10.3 percent; 3) Colorado 10.2 percent; 4) Florida 10.0 percent; and 5) Nevada 9.6 percent.
• Among the 100 most populated metropolitan areas in the U.S., annual price increases were greatest in North Port-Sarasota-Bradenton, FL, where prices increased by 15.7 percent. Prices were weakest in Bridgeport-Stamford-Norwalk, CT, where they fell 3.3 percent.
• Of the nine census divisions, the Mountain division experienced the strongest increase in the second quarter, posting a 1.9 percent quarterly increase and an 8.1 percent increase since the second quarter of last year. House price appreciation was weakest in the Middle Atlantic division, where prices rose 0.6 percent from the last quarter. 

Tables and graphs showing home price statistics for metropolitan areas, states, census divisions, and the U.S. as a whole are included on the following pages.

Other Price Indexes

Most statistics in the quarterly house price index report reference price changes computed by Federal Housing Finance Agency’s basic “purchase-only” House Price Index. In some cases, however, the reported statistics reference alternative price measures. Federal Housing Finance Agency publishes – and makes available for download – three additional home price indexes beyond the basic “purchase-only” series. Although they use the same general methodology, the three alternatives rely on slightly different datasets as follows:

• “Distress-Free” house price indexes. Sales of bank-owned properties and short sales are removed from the purchase-only dataset prior to estimation of the indexes.
• “Expanded-Data” house price indexes. Sales price information sourced from county recorder offices and from FHA-backed mortgages are added to the purchase-only data sample. This index is used annually to adjust the maximum conforming loan limits, which constrain the size of loans that can be acquired by Fannie Mae and Freddie Mac.
• “All-Transactions” house price indexes. Appraisal values from refinance mortgages are added to the purchase-only data sample.

Data constraints preclude the production of all types of indexes for every geographic area, but multiple index types are generally available. For individual states, for instance, three types of indexes are available. The various indexes tend to correlate closely over the long-term, but short-term differences can be significant.

Background

Federal Housing Finance Agency’s House Price Index tracks changes in average home prices by analyzing changes in home values for the individual properties. The underlying “repeat-transactions” methodology constructs index estimates by statistically evaluating price appreciation (or depreciation) for homes with multiple values over time. The purchase-only House Price Index uses sales price information from Fannie Mae- and Freddie Mac-purchased and Enterprise-guaranteed mortgages originated over the past 41 years. The purchase-only House Price Index is estimated with over seven million repeat-transactions.