FHFA House Price Index: Up 1.1% in October, Another All Time High
The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for October. Here is the opening of the press release:
Washington, D.C. – House prices rose nationwide in October, up 1.1 percent from the previous month, according to the latest Federal Housing Finance Agency House Price Index (FHFA HPI®). House prices rose 17.4 percent from October 2020 to October 2021. The previously reported 0.9 percent price change for September 2021 remained unchanged.
For the nine census divisions, seasonally adjusted monthly house price changes from September 2021 to October 2021 ranged from -0.3 percent in the New England division to +1.7 percent in the East South Central division. The 12-month changes ranged from +13.2 percent in the West North Central division to +23.2 percent in the Mountain division.
“House price levels continue to rise but the rapid pace is curtailing through October,” said Will Doerner, Ph.D., Supervisory Economist in FHFA’s Division of Research and Statistics. “The large market appreciations seen this spring peaked in July and have been cooling this fall with annual trends slowing over the last four consecutive months.”
The chart below illustrates the monthly HPI series, which is not adjusted for inflation, along with a real (inflation-adjusted) series using the Consumer Price Index: All Items Less Shelter.
In the chart above we see that the nominal HPI index has exceeded its pre-recession peak of what's generally regarded to have been a housing bubble. Adjusted for inflation, the index is now at 185.4, fractionally below its all-time high.
The next chart shows the growth of the nominal and real index since the turn of the century.
For an interesting comparison, let's overlay the HPI and the most closely matching subcomponent of the Consumer Price Index, Owners' Equivalent Rent of Residences (OER). Note: For an explanation of OER, see this PDF commentary from the Bureau of Labor Statistics.
HPI and OER moved in close parallel from the 1991 inception date of the former until early 1999, when the two parted company and HPI began accelerating into the housing bubble. HPI then fell 20.7% over the next 48 months to its March 2007 trough. Confirmation of the "bubble" designation for house prices is the 39.5% spread between HPI and OER in January 2006.
Are we in another housing bubble? The current spread is 52.7%, exceeding the "bubble designation" just mentioned.
Here we compare the Consumer Price Index for All Urban Consumers to both the Nominal and Real House Price Index, which is a similar comparison to what we do in our Case-Shiller update. Nominal HPI growth has clearly taken off since 2012. However, when adjusted for inflation, the House Price Index has not seen as dramatic an increase since the late 1990s.
Our next update of the FHFA House Price Index will be on January 25.