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 July reports for the FHFA House Price Index and S&P / Case-Shiller Home Price Index showed mixed results for May. While the FHFA House Price index moved up, the S&P / Case-Shiller Home Price Index surprising moved in the opposite direction. The FHFA House Price Index for July 2015 showed that May housing prices increased 0.4% as compared to April and increased 5.7% on a year-over-year basis (so as compared to May 2014). The FHFA House Price Index figures came in at the the midpoint of analyst estimates and were flat compared to April 2015, which also showed a 0.4% monthly increase and a 5.3% year-over-year increase. The housing price appreciation reflected in the FHFA House Price Index does not come as a surprise given the favorable trends in the recent new and existing home sales reports. What does come as a surprise is that the S&P / Case-Shiller Home Price Index showed that May housing prices decreased 0.2% as compared to April while increasing 4.9% on a year-over-year basis. Both figures came in below analyst expectations. Of note in the S&P / Case-Shiller Home Price Index report is that twelve of 20 cities included in the index showed price declines, up from eight cities in April. (Source: Bloomberg)
What it Means for Mortgage Borrowers
We always like to point out that there is a two month lag in the data reported by the FHFA House Price and S&P / Case-Shiller Home Price indices but both reports showed that home price appreciation moderated in May. Cooling housing prices are a positive for borrowers as they makes housing more affordable. For example, softening May housing prices are likely one of the factors that contributed to strong housing sales in June. It is important to highlight that housing price trends vary significantly by market but the overall trend in May benefited borrowers. It is uncertain what direction housing prices will take in the future but prospective home buyers can use our Mortgage Qualification Calculator to determine what size mortgage you can afford today. Additionally, you should use the INTEREST RATES feature on FREEandCLEAR to compare mortgage rates and fees for lenders in your area and find the mortgage that is right for you.
The FREEandCLEAR Mortgage Expert