The Wilder View

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”

GuestJuly 24th, 2009 at 8:12 am

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.

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