House Price Indices: Not Necessarily the Same Story
I compare three competing monthly home price indices: the S&P Case-Shiller Composite 20, the FHFA purchase-only index, and the LoanPerformance HPI. Over the year, the stabilization in home values is evident across the board. However, on a 3-month annualized basis, the majority vote shows a stark second-derivative improvement in home values.
The differences between the S&P Case Shiller Composite 20 and the FHFA (formerly OFHEO) purchase-only index are well known. The FHFA tracks home values of mortgages guaranteed by Fannie Mae and Freddie Mac (conforming mortgages only). The S&P Case Shiller Composite 20 does not discriminate and includes home valuwes tied to jumbo mortgages (non-conforming mortgages) as well. On the other hand, the monthly FHFA covers a broader geographic region, including all of the census regions, while the S&P Case Shiller Composite 20 covers just 20 metropolitan areas.
The monthly LoanPerformance HPI claims to be both geographically superior, building its index up from the bottom at the zip-code level. It covers all 50 states, including D.C. (see its methodology at the bottom of the page), and tracks home values of all loan types. This is the HPI used by the Fed to calculate the value of real estate assets in the Flow of Funds accounts.
The chart above illustrates the annual growth rate of each home price index, where each index is showing stabilization in home values on a Yr/Yr basis. However, over the last three months, it is a very different story.
This chart illustrates the 3-month annualized growth rate of each home price index. The annualized growth rate is the implied growth rate over the next year if the next 3 quarters saw the same growth rate as the latest quarter (February ’09 through April ’09, the latest data point).
Here, the stories diverge. The S&P Case-Shiller Composite 20 is still falling at a very quick rate, -18% annualized. However, the FHFA and LoanPerformance HPI are showing stark improvements over the last 3 months, -5% and -3% annualized growth.
If this was a majority vote, FHFA and LoanPerformance would win, and the monthly growth in home values is not as dire as suggested by the S&P Case Shiller Composite 20. There has been significant second-derivative improvement in the last three months.
Originally published at News N Economics and reproduced here with the author’s permission.
9 Responses to “House Price Indices: Not Necessarily the Same Story”
One explanation may be that, high end housing with “jumbo” mortgages are in free fall. They would show up significantly in the urban Case-Shiller index but not at all in the FHFA index and would be duluted in the LoanPerformance numbers.
First off I would like to say wonderful blog! I had a quick question in which I’d like to ask if you do not mind. I was curious to find out how you center yourself and clear your head prior to writing. I’ve had a hard time clearing my thoughts in getting my ideas out. I truly do enjoy writing however it just seems like the first 10 to 15 minutes are generally wasted simply just trying to figure out how to begin. Any suggestions or tips? Thank you!
his may be the perfect weblog for anybody who desires to know about this topic. You understand a lot its nearly hard to argue with you (not that I really would want…HaHa). You definitely place a new spin on a matter thats been written about for many years. Fantastic stuff, just wonderful!
Ya I even have used the acai berry supplement .It is very effective and it does’nt take too much time to show the result.
It’s laborious to search out knowledgeable people on this topic, but you sound like you understand what you’re talking about! Thanks
Considerably, this publish is really the sweetest on this notable subject. I harmonise along with your conclusions and can thirstily seem ahead in your incoming updates. Declaring thanks is not going to just be ample, for the phenomenal clarity in your writing. I will directly grab your rss feed to remain knowledgeable of any updates. Admirable function and much accomplishment with your business dealings! Please excuse my poor English as it truly is not my very first tongue.
Couldn?t be published any better. Reading this publish reminds me of my old room mate! He always kept talking about this. I will ahead this article to him. Pretty positive he will have a very good study. Thanks for sharing!
Have you ever considered adding more videos in your blog page posts to keep the readers more entertained? I imply I just read through the entire post of yours and it was really very good but since I’m more of a visual learner,I identified that to be more helpful properly let me understand how it turns out! I really like what you guys are always up also. This kind of clever perform and reporting! Hold up the wonderful works guys I’ve added you guys to my blogroll. That is a fantastic article thanks for sharing this informative details.. I will pay a visit to your weblog regularly for some latest publish.
Merely, admirable what you have done right here. It really is pleasing to search you express through the heart and your clarity on this significant content can be easily looked. Remarkable publish and can seem forward in your long run update.