FHFA House Price Index Down 0.1% in November

This article was originally written by Doug Short. From 2016-2022, it was improved upon and updated by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at Advisor Perspectives/VettaFi.


The Federal Housing Finance Agency (FHFA) has released its U.S. House Price Index (HPI) for November . Here is the opening of the press release:

​​​​​​​​​​​​​​​​​​Washington, D.C. – House prices fell 0.1 percent nationwide in November compared to October, according to the latest Federal Housing Finance Agency (FHFA) House Price Index (HPI®). House prices rose 8.2 percent from November 2021 to November 2022. The previously reported 0.0 percent price decline in October 2022 remained unchanged.

“U.S. house prices were largely unchanged in the last four months and remained near the peak levels reached over the summer of 2022,” said Nataliya Polkovnichenko, Ph.D., Supervisory Economist, in FHFA’s Division of Research and Statistics. “While higher mortgage rates have suppressed demand, low inventories of homes for sale have helped maintain relatively flat house prices.”

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.

House Price Index

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.

The next chart shows the growth of the nominal and real index since the turn of the century.

HPI Growth since 2000

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 review from the Bureau of Labor Statistics.

HPI versus OER

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 39.4% spread between HPI and OER in January 2006.

Are we in another housing bubble? The current spread is 55.4%, exceeding the "bubble designation" just mentioned. This is just below its all-time peak of 63.3%.

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.

HPI versus OER