In addition to being able to qualify for a mortgage and make a down payment, home prices are one of the most important factors that determine your ability to buy a home. The higher the home price, the larger the mortgage and down payment you need to purchase a home so it is a statistic we watch closely at FREEandCLEAR.
There are two primary measures of housing prices: 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. There are pros and cons to the way both indices are calculated so we like to keep track of both and analyze what they mean for mortgage borrowers. Both indices are reported on a monthly basis and include information for the month that is two months prior to the reporting date. For example, the report released in August contains information on housing prices in the month of June.
The FHFA House Price Index for August 2014 showed that June housing prices increased a modest 0.4% as compared to May and 5.1% on a year-over-year basis (so as compared to June 2013). The S&P / Case-Shiller Home Price Index for August 2014 showed that housing prices declined 0.2% as compared to May but increased 8.1% on a year-over-year basis, although this increase was less than the 9.3% year-over-year increase reported for May 2014. Taken together, the FHFA and S&P / Case-Shiller home price indices show that nationwide housing prices appear to be flattening after several years of strong price increases. It is important to highlight that these indices reflect the trend in nationwide housing prices and housing prices for a specific region or city can vary significantly. (Source: Bloomberg)
What it Means for Mortgage Borrowers
Flattening or declining home prices make homeownership more affordable for prospective home buyers. The combination of low interest rates and stabilizing home prices means now could be a good time for first-time home buyers or current homeowners who are looking to upgrade to buy a home, depending on what market you live in. Check out the COMPARE LENDERS function on FREEandCLEAR to review interest rates for lenders in your city and use our First-Time Home Buyer Basics Mortgage Guide or Home Purchase Mortgage Guide to help you master the mortgage process.
The FREEandCLEAR Mortgage Expert