Home Price Index Recommendations

[robertwells]

Hi, I just wondered if anyone has any recommendations for home price index sites used to assist in price trend analyses?

Thanks,

Bob

 

[TerryRohrer]

Don't use one that you do not develop yourself. They are simply the modern "Adjustment Sheet" for a single variable. If you need support for that opinion, just dig deep into the methodology relied on for each. If you can't find it, how are you going to defend it or determine its veracity in your market? Many that are not Case-Schiller rely on comparisons to or from refi appraisals as if they were market transactions. Relying on that means you are relying on appraisals by appraisers you do not know, using methodology that you do not know, and just assuming that both are perfect. And a thousand other reasons. I have compared the FHFA HPI to resales of the same houses in my market. In a limited test, the FHFA HPI was slightly to dramatically higher than actual, real life data in markets I am familiar with could support. Your mileage may vary, though.

 

[robertwells]

Don't use one that you do not develop yourself. They are simply the modern "Adjustment Sheet" for a single variable. If you need support for that opinion, just dig deep into the methodology relied on for each. If you can't find it, how are you going to defend it or determine its veracity in your market? Many that are not Case-Schiller rely on comparisons to or from refi appraisals as if they were market transactions. Relying on that means you are relying on appraisals by appraisers you do not know, using methodology that you do not know, and just assuming that both are perfect. And a thousand other reasons. I have compared the FHFA HPI to resales of the same houses in my market. In a limited test, the FHFA HPI was slightly to dramatically higher than actual, real life data in markets I am familiar with could support. Your mileage may vary, though.

Thanks for the input

 

[Marty S.]

Bob: Here is a link to Freddie Mac' home price index:

Freddie Mac House Price Index (FMHPI®)

The Freddie Mac House Price Index (FMHPI®) measures typical home price inflation, based on loans bought by Freddie Mac or Fannie Mae.

www.freddiemac.com

Marty S.

 

[Terrel L. Shields]

Check your MLS statistics functions. You can download that and massage it yourself if you prefer in Excel, but most MLS's will have a statistics and graph function of some sort.

 

[TerryRohrer]

Just a small sample as to why the FMHPI linked above is inappropriate for use in the development of an opinion of market value of a single property by a competent appraiser.

"When using the FHFA House Price Calculator, please note that it does not project the actual value of any particular house. Rather, it projects what a given house purchased at a point in time would be worth today if it appreciated at the average appreciation rate of all homes in the area." The index is based on comparison of sales of property at the same address. By some estimates, just 1% of homes in the USA change hands each year. How much veracity can there be in the claim that this HPI reflects the "average appreciation rates of all homes in the area"?

The FHFA House Price Calculator uses the FHFA Purchase-Only House Price Index (not seasonally adjusted) for all states, including the District of Columbia, and for the largest 100 Metropolitan Statistical Areas and Divisions. Are you comfortable with applying one inflation rate across your entire state, or, if you are so located, across one of the 100 MSAs they consider? Here, within a 140 radius, median home prices range from, say, $84,000 to $700,000, and in those different counties, some can be experiencing price declines while others are inflating at unprecedented rates. And within any county, homes in some price ranges might be inflating while homes in another price range are simultaneously falling. But the FMHPI purportedly reflects an average for the state.

"The use of repeat transactions on the same physical property units helps to control for differences in the quality of the houses comprising the sample used for statistical estimation. For this reason the HPI is described as a “constant quality” house price index." Since pairs are selected by address alone, changes to the property, such as minor remodeling, major remodeling, etc, are not addressed except by assumption that isn't clearly spelled out. Has anyone seen a property that sold as an C5, lipstick added, and resold a short time later as a C3? Those are in this index, overstating the "average appreciation rate of all homes in the area."

...differential rates of depreciation for otherwise similar properties are more likely over longer periods of time. In addition, localized value differences may appear over time as neighborhood identities emerge or evolve with changes in the socioeconomic and demographic characteristics. Differences in house price growth rates associated with sub-market heterogeneity is an additional source of variation around a market index. Has anyone ever seen changes in their neighborhoods over time? Here, a small, predominantly railroad town about 10 miles from the largest town in the state was heavily populated with century old homes in very poor condition. As prices in the large town rose quickly, many turned to that small town due to affordability. Old, rundown homes were purchased, heavily remodeled, and resold at much higher prices, at a large scale. The FMHPI largely reflects those price changes as inflation, ignoring the change in the product between the two sales.

"This approach limits the extent to which changes in the composition of the sample used for estimation can influence the estimated index. " The comparison of resales only aspect of the purchase only HPIs is correct, and this issue is the weakness of all the current analyses being promoted which rely on the comparison of average or median prices over time. Regardless of the scrubbing being done (which isn't informed regarding its impact on the conclusions regarding inflation), comparisons of median prices or average prices over time do not account for the change in the product mix over time, and do not account for changes that may take place over time regarding the contributory value of amenities over time.

There is no reason an appraiser with MLS access cannot conduct an analysis of resales in their own markets. They should always have as much or more data as the GSEs because not all real estate transactions are included in the GSE databases. Plus, appraisers can reliably determine when remodeling or other physical changes impact prices where the GSEs cannot. What appraisers can't do, and should not do, is include data from their entire state in order to have enough data to generate an HPI index that is represented as a valid measure of housing inflation applicable to the appraisal of every home in their state. To do so requires that all rational and accepted appraisal techniques be ignored. In my view, any appraisal relying on HPIs not produced by the appraiser should be sent to the state so that the appraiser can defend the practice, which is indefensible.

https://www.fhfa.gov/sites/default/files/2023-04/1996-03_HPI_TechDescription_N508.pdf

 

[robertwells]

Bob: Here is a link to Freddie Mac' home price index:

Freddie Mac House Price Index (FMHPI®)

The Freddie Mac House Price Index (FMHPI®) measures typical home price inflation, based on loans bought by Freddie Mac or Fannie Mae.

www.freddiemac.com

Marty S.

Thanks for the link, Marty. I took a quick look and don't really understand how it works. Is it just like a CSV file that's uploaded every month for major cities?