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There are two primary measures of housing prices that we track at FREEandCLEAR: the Federal Housing Finance Agency (FHFA) House Price Index, which uses certain nationwide mortgage activity to track home prices and the S&P / Case-Shiller Home Price Index, which tracks home prices in 20 U.S. metropolitan markets. Both indices are reported on a monthly basis and include information for the month that is two months prior to the reporting date.
The FHFA House Price Index for February 2015 showed that December housing prices increased 0.8% as compared to November and increased 5.4% on a year-over-year basis (so as compared to December 2013). The FHFA House Price Index for December came in at the high end of the range of analyst projections and built upon comparable results for November 2014 which showed a 0.7% increase on a monthly basis and a 5.2% increase on a year-over-year basis. The S&P / Case-Shiller Home Price Index for January 2015 showed similar results with housing prices increasing 0.9% in December as compared to November and increasing 4.5% on a year-over-year basis, which represents a slight increase as compared to the 4.3% year-over-year growth reported in November. The monthly increase in the index represented the largest increase in nine months. The S&P / Case-Shiller Home Price Index figures came in at the top end of analyst expectations with both the monthly and annual figures increasing slightly as compared to November. The positive performance for both the FHFA House Price and S&P / Case-Shiller Home Price indices to close out 2014 shows stability in housing values but contrasts with more recent data on housing prices in the February new and existing home sales reports, which both showed declines in median home sales prices in January. (Source: Bloomberg)
What it Means for Mortgage Borrowers
Home price appreciation is a positive for homeowners but a negative for home buyers looking to enter the market, although the February reports are not all negative for home buyers. The strong showings from the FHFA Housing Price Index and S&P / Case-Shiller Home Price Index for the second consecutive month may cause more homeowners to consider selling which would bring more supply on the housing market for buyers. Additionally, housing market statistics continue to be mixed as more recent reports on home sale prices showed that prices softened in January as home sales declined. Plus, interest rates continue to be relatively low which means buyers can afford larger mortgages and buy more house for their money. A more significant increase in the indices would be cause for concern but FREEandCLEAR believes that now continues to be a favorable time to consider buying a home. Use the FREEandCLEAR Mortgage Qualification Calculator to determine what size mortgage you can afford and review our Mortgage Process Guide to master the mortgage process from start to finish.
The FREEandCLEAR Mortgage Expert