House price index
Encyclopedia
FHFA/OFHEO
The US Federal Housing Finance AgencyFederal Housing Finance Agency
The Federal Housing Finance Agency is an independent federal agency created as the successor regulatory agency resulting from the statutory merger of the Federal Housing Finance Board , the Office of Federal Housing Enterprise Oversight , and the U.S...
(formerly Office of Federal Housing Enterprise Oversight
Office of Federal Housing Enterprise Oversight
The Office of Federal Housing Enterprise Oversight was an agency within the Department of Housing and Urban Development. It was charged with ensuring the capital adequacy and financial safety and soundness of two government sponsored enterprises—the Federal National Mortgage Association and the...
aka OFHEO) publishes the HPI inx, a quarterly broad measure of the movement of single-family house prices.
The HPI is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties in 363 metropolises. This information is obtained by reviewing repeat mortgage transactions on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975.
Since the HPI index only includes houses with mortgages within the conforming amount limits, the index has a natural cap and does not account for jumbo mortgages
Jumbo mortgages
In the United States, a jumbo mortgage is a mortgage loan in an amount above conventional conforming loan limits. This standard is set by the two government-sponsored enterprises Fannie Mae and Freddie Mac, and sets the limit on the maximum value of any individual mortgage they will purchase from...
.
The HPI was developed in conjunction with OFHEO's (now FHFA) responsibilities as a regulator of Fannie Mae and Freddie Mac. It is used to measure the adequacy of their capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
against the value of their assets, which are primarily home mortgages.
On July 30, 2008 OFHEO became part of the new Federal Housing Finance Agency (FHFA). The index is now termed the FHFA HPI.
S&P/Case-Shiller Indices
The Case-Shiller index prices are measured monthly and tracks repeat sales of houses using a modified version of the weighted-repeat sales methodology proposed by Karl Case and Robert ShillerRobert Shiller
Robert James "Bob" Shiller is an American economist, academic, and best-selling author. He currently serves as the Arthur M. Okun Professor of Economics at Yale University and is a Fellow at the Yale International Center for Finance, Yale School of Management...
and Allan Weiss. This means that, to a large extent, it is able to adjust for the quality of the homes sold, unlike simple averages.
As a monthly tracking index, Case-Shiller Index has long lag time. Typically, it takes about 2 months for S&P to publish the results, as opposed to 1 month for most other monthly indices and indicators. Specific indexes are available for specific metropolitan areas, and composite indexes for the top 20 and top 10 metro areas, and nationwide.
IAS360
The IAS360 House Price Index http://www.iasreo.com/ias360update.html provides a monthly view of housing price trends in the U.S. based on neighborhood level data (market trends at a county level). IAS360 is a comprehensive housing index tracking monthly change in the median sales price of detached single-family residences in more than 15,000 “neighborhoods” across the country. This data is then rolled up to report on the changes in 360 counties, nine census divisions, four regions, and the nation overall. This index is released more quickly than the Case-Shiller.UK
House Price Indices (HPIs) have been produced in the UK since around 1973, initially by mortgage-providers, and more recently by government bodies. More recently, they have come from property market websites.The dominant methodologies are
- Hedonic regressionHedonic regressionIn economics, hedonic regression or hedonic demand theory is a revealed preference method of estimating demand or value. It decomposes the item being researched into its constituent characteristics, and obtains estimates of the contributory value of each characteristic...
(also known as the characteristic based) Method and standardisation??? - standardisation
- Repeat Sales Regression.
Governmental house price indices
- The Land Registry House Price Index is calculated on behalf of HM Land RegistryHM Land RegistryLand Registry is a non-ministerial government department and executive agency of the Government of the United Kingdom. It was created in 1862 to register the ownership of land and property in England and Wales...
by Calnea Analytics. It uses the Land Registry’s own data, which consists of the transaction records of all residential property sales in England and Wales. It uses Repeat Sales Regression. The number of monthly transactions is approximately 100,000 per month. The index excludes sales from repossessions and auctions as these "do not represent full market price".
- The DCLG House Price Index http://www.communities.gov.uk/housing/housingresearch/housingstatistics/housingstatisticsby/housingmarket/overviewhousingmarketstats/ for the Department of Communities and Local Government uses the mix-adjusted method, which is based on weighted averages. The data used in this HPI is mortgage completion data supplied by a few large lenders.
- A House Price Index used to be produced by the Department for the EnvironmentSecretary of State for the EnvironmentThe Secretary of State for the Environment was a UK cabinet position, responsible for the Department of the Environment . This was created by Edward Heath as a combination of the Ministry of Housing and Local Government, the Ministry of Transport and the Ministry of Public Building and Works on 15...
.
Private sector house price indices
- The Nationwide House Price Index and Halifax House Price Index use Hedonic regressionHedonic regressionIn economics, hedonic regression or hedonic demand theory is a revealed preference method of estimating demand or value. It decomposes the item being researched into its constituent characteristics, and obtains estimates of the contributory value of each characteristic...
(also known as the characteristics based method) using their own datasets compiled from their mortgage lending. These indices have a longer time-series than the Governmental HPIs.
Current UK indices
| Index | Calculated by | Source data | Observations (approx) | Quality Adjustment Method | Local Indices | Frequency | Price Observations |
|---|---|---|---|---|---|---|---|
| HM Land Registry HM Land Registry Land Registry is a non-ministerial government department and executive agency of the Government of the United Kingdom. It was created in 1862 to register the ownership of land and property in England and Wales... |
Calnea Analytics | HM Land Registry HM Land Registry Land Registry is a non-ministerial government department and executive agency of the Government of the United Kingdom. It was created in 1862 to register the ownership of land and property in England and Wales... |
100k | RSR RSR RSR, a three letter acronym that may mean:*Radio Suisse Romande the Swiss French public service radio group*Relative survival rate*Resource status report*Reverie Sound Revue, a Canadian band*Former international license plate code for Southern Rhodesia... |
Yes | Monthly | Actual price paid |
| DCLG | DCLG | Lender data | 45k | SMA | Regional Only | Monthly | Mortgage completions |
| Halifax | Halifax | Loan approvals | 12k | HR | Regional Only | Monthly | Price agreed at time of loan approval |
| Nationwide | Nationwide | Loan approvals | 12k | HR | Regional Only | Monthly | Price agreed at time of loan approval |
| FindaProperty.com | Calnea Analytics | Rental prices | Undisclosed | HR | Regional Only | Monthly | Rental prices |
| Home.co.uk | Calnea Analytics | Asking prices online | 800k | SMA | Regional Only | Monthly | Asking price |
| Rightmove Rightmove Rightmove plc is a British-based company that runs www.rightmove.co.uk, an online real estate portal. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.- The company :... |
Rightmove Rightmove Rightmove plc is a British-based company that runs www.rightmove.co.uk, an online real estate portal. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.- The company :... |
Asking prices online | Undisclosed | SMA | Regional Only | Monthly | Asking price |
| Financial Times | Acadametrics | Land Registry | 100k | SMA | Yes | Monthly | Actual price paid |
Ireland
In the Republic of IrelandRepublic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
, Permanent TSB (a large mortgage lender) and the Economic and Social Research Institute
Economic and Social Research Institute
The Economic and Social Research Institute is a think tank in Dublin, Ireland. Its research focuses on Ireland's economic and social development in order to inform policy-making and societal understanding....
(a think-tank) have published a monthly houseprice index since January 1996.
Canada
In Canada, a house price index is maintained by the Canadian Real Estate AssociationCanadian Real Estate Association
The Canadian Real Estate Association represents over 100,000 Realtors across Canada.The Association owns the Multiple Listing Service or MLS trademark and the Realtor trademarks in Canada. Local real estate Boards or Associations operate a local data base under a licensing agreement with the...
, based on reported sale prices submitted by real estate agents, and averaged by region. In December 2008, the private National Bank
National Bank of Canada
National Bank of Canada is the 6th largest bank and 8th largest financial institution in Canada. The bank's headquarters are in Montreal, Quebec....
and the information technology firm Teranet began a separate monthly house price index based on resale prices of individual single-family houses in selected metropolitan areas, using a methodology similar to the Case-Shiller index
Case-Shiller index
The Standard & Poor's Case–Shiller Home Price Indices are constant-quality house price indices for the United States. There are multiple Case–Shiller home price indices: A national home price index, a 20-city composite index, a 10-city composite index, and twenty individual metro area...
and based on actual sale prices taken from government land registry databases. This allows Teranet and the National Bank to track prices without allowing periods of high sales in one city to push up the national average. The National Bank also operates a forward market
Forward market
The forward market is the over-the-counter financial market in contracts for future delivery, so called forward contracts. Forward contracts are personalized between parties The forward market is the over-the-counter financial market in contracts for future delivery, so called forward contracts. ...
on Canadian housing prices.
See also
- Real estate bubbleReal estate bubbleA real estate bubble or property bubble is a type of economic bubble that occurs periodically in local or global real estate markets...
- United States housing bubbleUnited States housing bubbleThe United States housing bubble is an economic bubble affecting many parts of the United States housing market in over half of American states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and may not yet have hit bottom as of 2011. On December 30, 2008 the...
- United States housing market correctionUnited States housing market correctionA United States housing market correction is a market correction or "bubble bursting" of a United States housing bubble; the most recent began following a national home price peak first identified in July 2006. Because realty trades in illiquid markets relative to financial assets such as common...
Resources
- Downie, M. L. & Robson G. (2007) Automated Valuation Models: an international perspective. Pp 11 Council of Mortgage Lenders, London, ISBN 1-905257-12-0.
- Lim, S. & Pavlou M. (2007) An improved national house price index using Land Registry data RICS research paper series: Volume 7 Number 11. Pp 10–14. London, ISBN 978-1-84219-347-1. Accessed 21 November 2007.
- How is the HPI calculated? (2007) Accessed 29 November 2007