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 April 2015 showed that February housing prices increased 0.7% as compared to January and increased 5.4% on a year-over-year basis (so as compared to February 2014). The FHFA House Price Index for February came in slightly above the range of analyst estimates and improved relative results for January 2015 which showed a 0.3% increase on a monthly basis and a 5.1% increase on a year-over-year basis. The FHFA House Price Index shows that home prices are appreciating at a somewhat faster pace which suggests increasing demand from home buyers. The S&P / Case-Shiller Home Price Index for April 2015 showed similar strong results with housing prices increasing 0.9% in February, as compared to January, and increasing 5.0% on a year-over-year basis, which represents an increase as compared to the 4.6% year-over-year growth reported in January. The S&P / Case-Shiller Home Price Index for January came in at the high end of the range of analyst projections. Both the FHFA House Price and S&P / Case-Shiller Home Price indices continued a strong run that started in late 2014. Improving home prices may encourage more home owners to sell thereby bringing more supply on the market although the jump in the rate of price appreciation is a cause for concern for home buyers. (Source: Bloomberg)
What it Means for Mortgage Borrowers
The home price indices reports offer both good and bad news for mortgage borrowers. The increase in home prices is positive because it reflects and improving housing market as well as borrowers’ ability to obtain mortgages. Additionally, an increase in home prices typically leads to more home owners selling their properties, increasing the supply available for prospective buyers. On the flip side, an increase in prices makes homes less affordable for prospective home buyers. Low interest rates help to offset increasing home prices but more significant price increases in the future could hinder the real estate and mortgage markets. If you are thinking about buying a home within the next year, review the FREEandCLEAR downloadable Mortgage Process Guide which offers numerous time and money-saving tips. Additionally, use our INTEREST RATES function to review mortgage rates and fees for lenders in your area and contact lenders to get pre-approved for your mortgage.
The FREEandCLEAR Mortgage Expert