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What is the House Price Index?

Written by Dan Green

Dan Green

Since 2003, Dan Green has been a leading mortgage lender and respected industry authority. His unwavering commitment to first-time home buyers and home buyer education has established him as a trusted voice among his colleagues, his peers, and the media. Dan founded Homebuyer.com to expand the American Dream of Homeownership to all who want it. Read more about Dan Green.

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Updated: February 12, 2024

What is the House Price Index?

The House Price Index (HPI) is an economic indicator that tracks changes in home prices across the United States, based on purchases of the same home over time.

TABLE OF CONTENTS

House Price Index: A Detailed Explanation

The House Price Index, as developed by the Federal Housing Finance Agency (FHFA), is a barometer for measuring the movement of single-family house prices in the U.S. It provides a macro-level understanding of the housing market’s current state and potential future trends.

By monitoring the HPI, first-time home buyers can add a data point about whether it’s a good time to buy a home, understanding whether it’s a buyer’s or seller’s market based on historical price trends and current values. The HPI is a valuable tool for comparing current and past prices.

The House Price Index is also used to establish conforming mortgage loan limits, which are based on the annual Q3 change in HPI.

For more detailed information on the House Price Index, visit the FHFA’s official website.

How is the House Price Index Calculated?

The FHFA’s House Price Index is calculated using a weighted repeat-sales method. This method involves analyzing mortgage transaction data from Fannie Mae and Freddie Mac to track home value changes over time, focusing on properties with at least two successive sales. The index measures the price change of the same property over different periods, providing a realistic and consistent view of price movements in the housing market.

House Price Index: Chart

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Data: Federal Housing Finance Agency. Do not reprint without permission.

Common Questions About the House Price Index

Why is the House Price Index important for first-time home buyers?

The House Price Index helps first-time buyers gain insight into the trends and direction of the national housing market, which can help a buyer make informed decisions about when and where to purchase a property.

How often is the House Price Index updated?

The FHFA updates the House Price Index quarterly and annually, providing both a short-term and long-term view of the housing market trends.

Can the House Price Index predict future home values?

While the House Price Index is a strong historical indicator, it should not be relied upon to predict future market direction.

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