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About U.S.A House Price Index
If you are looking to buy or sell your property you must have an idea about the property prices in your area.
Many parameters affect the property prices in an area. These parameters help to determine the house price index in various regions of the country.
In this post, we will learn what is the house price index is in detail.
What Is HPI?
The HPI is a Federal Housing Finance Agency’s (FHFA) index that indicates the prices of single-family homes.
The HPI measures home prices based on information from home purchases and mortgage refinances in all 50 states and more than 400 US cities since the 1970s.
In addition to serving as an indicator of housing price developments, it also functions as a tool for understanding estimated changes in mortgage prepayments, housing affordability, and mortgage defaults.
Deeper Definition Of HPI.
The HPI is compiled by the Federal Housing Finance Agency (FHFA) using data provided by the Federal Home Loan Mortgage Corp. (FHLMC), commonly known as Freddie Mac, and the Federal National Mortgage Association (FNMA), commonly known as Fannie Mae.
HPI is derived from transactions like conforming and conventional mortgages on single-family homes.
This index is measured based on the resale or refinancing of the same properties by calculating their average price changes after every transaction.
The home price index report is usually issued quarterly, however, since March 2008 a monthly report has also been issued regularly.
The data for HPI is collected from a review of mortgages purchased or securitized by Freddie Mac and Fannie Mae.
The HPI is a measure of changes in single-family home prices that began in the mid-1970s to the present using complex analysis. It measures the average change of home value during the resale or refinancing transaction of the same property.
The home price index is a “constant quality” index because changes in housing quality are supervised by tracking the same single-family homes over time. The HPI displays nominal gains as it is not adjusted for inflation.
The data represented in HPI includes tens of millions of US home sales. Because the index tracks home sales over time, it provides an overview of changes in home price at the national, state, census, county, metro, and zip code levels.
How Is HPI Utilized?
The HPI is one of several economic indicators that investors use to gain insight into broader economic trends and potential movements in the stock market.
Rising and falling real estate prices can have serious consequences on a country’s economy.
Rising prices generally create more jobs, boost confidence and encourage higher consumer spending.
This opens the gates for greater aggregate demand, improving the country’s gross domestic product (GDP) and overall economic growth.
However, when real estate prices fall, the opposite happens. Consumer confidence falls and many organizations profiting from the demand for real estate initiate laying off their employees which could sometimes cause an economic recession.
How Does The HPI Work?
The HPI is a free, publicly available measure of US housing prices. FHFA. The index is calculated based on single-family mortgages purchased or securitized through Freddie Mac and Fannie Mae, the largest mortgage GSEs in the United States.
The HPI provides a tool for understanding housing market trends that play an important role in the economy.
For example, researchers can use the HPI to understand changes in housing affordability, prepayments, and mortgage defaults.
Conclusion
A house price index is a free tool provided by FHFA publicly. This tool is mostly used by researchers to understand the economic trends that help investors to invest their money in the real estate market at the right time to get maximum returns.
You as a homeowner or home buyer can use this indicator to analyze the property prices in your area if you are looking to buy or sell your real estate property.
