What Is the House Price Index HPI?

The House Price Index (HPI) is a broad measure of changes in the prices of single-family homes in the United States. It serves as a housing price trend indicator as well as an analytical tool for estimating changes in mortgage defaults, prepayments, and housing affordability.

The Federal Housing Finance Agency creates the HPI by combining data from the Federal National Mortgage Association (FNMA), also known as Fannie Mae, and the Federal Home Loan Mortgage Corporation (FHLMC), also known as Freddie Mac (FHFA).

The HPI is based on conventional and conforming single-family home mortgage transactions. It's a weighted repeat sales index that figures the average price changes in repeat sales or refinancings on the same properties.

An HPI report is produced every quarter, but from March 2008, a monthly report has been provided every month. Fannie Mae and Freddie Mac get information by examining mortgages that they have acquired or securitized.

Investors use the HPI as one of several economic indicators to track larger economic trends and potential stock market changes.

Changes in house values may have a substantial influence on the economy. Price increases usually lead to additional jobs, improved consumer confidence, and more spending. Raising aggregate demand enhances GDP and overall economic growth.

When prices fall, the inverse is more likely to happen. Consumer confidence is diminishing, and many real estate firms are laying off employees. This can sometimes result in a decline in the economy.

The Case-Shiller Home Price Indexes from S&P CoreLogic vs. the House Price Index (HPI)

The HPI isn't the sole tool for tracking real estate values. One of the most well-known alternatives is S&P CoreLogic Case-Shiller Home Price Indexes.

These indices use a number of data and measuring methods to produce a diverse set of results. For example, the HPI gives all homes equal weight, but the S&P CoreLogic Case-Shiller Property Price indexes provide a value to each home.

In addition, unlike Case-Shiller indexes, which only evaluate purchase prices, the HPI also considers refinancing valuations. Furthermore, the HPI encompasses a greater range of topics.

Two of the most well-known mortgage businesses in the United States are Freddie Mac and Fannie Mae.

As previously indicated, the HPI calculates average price changes for houses that are sold or refinanced using mortgages acquired or backed by Fannie Mae or Freddie Mac. That is to say, it excludes loans and mortgages obtained from other sources, such as the federal government.

Fannie Mae is a financial institution that was founded in the United States of America.

Fannie Mae is a government-sponsored enterprise (GSE) that is publicly traded and managed by a legislative charter. The objective of the firm is to keep the mortgage markets viable. Fannie Mae does this by acquiring and insuring mortgages from reputable lenders like credit unions and local and national banks; it is unable to create loans.

The FNMA promotes mortgage market liquidity and makes homeownership more accessible to low-, moderate-, and middle-income Americans by developing a secondary market. Fannie Mae was founded in 1938 as part of the New Deal during the Great Depression.

Freddie Mac, also known as the FHLMC, is a government-sponsored business (GSE) that works in the same way as Fannie Mae. It creates mortgage-backed securities (MBS) by purchasing, guaranteeing, and securitizing mortgages (MBS). The company then produces liquid MBS with credit ratings comparable to US Treasury bonds.

Because of its links to the US government, Freddie Mac may borrow money at cheaper interest rates than other financial institutions.

Main Points

1. In the United States, the House Price Index (HPI) is a broad gauge of single-family home price change.

2. It is published by the Federal Housing Finance Agency (FHFA) utilizing data from Fannie Mae and Freddie Mac, which is given on a quarterly basis.

3. The HPI is one of a number of economic indicators that investors use to analyze larger economic trends and potential stock market movements.