Home prices have now increased on a quarterly basis 12 consecutive times.  The Federal Housing Finance Agency (FHFA) said yesterday that the 12th increase in its purchase-only seasonally adjusted House Price Index (HPI) was a 0.81 percent rise in the second quarter of 2014.  The seasonally adjusted monthly index for June was up 0.4 percent from May, its seventh consecutive monthly increase and the 23rd month it has gained out of the last 24.

A closer look at the quarterly numbers however confirms the data reported by Case-Shiller, Core-Logic, and others; those price increases are far from being as muscular as they once were.



Quarterly increases peaked in Q2 of 2013 at 2.29 percent (9.14 percent annualized) and annual increases hit a high of 8.30 percent in Q3.  Since those mid-2013 periods all three measures have plummeted.  Quarterly appreciation dropped to 1.80 percent in Q3 and 1.23 percent in Q4.  There was a slight uptick to 1.31 percent in the first quarter of 2014 before growth slowed to 0.81 percent in the most recent quarter.  Annual increases have slowed even more steadily:  7.72 percent in the fourth quarter of 2013 then 6.79 and 5.25 percent in the first two quarters of 2014.  The annualized quarterly appreciation in the second quarter was 3.24 percent.

"The extraordinary price appreciation observed over the last few spring seasons was not evident in the second quarter of this year.  However, house price appreciation for the nation as a whole remained positive," said FHFA Principal Economist Andrew Leventis. "FHFA's data indicate that house price appreciation in the quarter was near or below the baseline rate of inflation in most states."

The seasonally adjusted, purchase-only HPI rose in 40 states during the second quarter of 2014, down from 42 states and the District of Columbia during the first quarter of 2014.  Annual appreciation was highest in Nevada, California, District of Columbia, North Dakota, and Arizona.

The Pacific division experienced the strongest increase in the second quarter, posting a 1.3 percent quarterly increase and a 9.8 percent increase since last year.  House prices were weakest in the East South Central division, where prices decreased 0.1 percent from the prior quarter. 

As measured with purchase-only indexes for the 100 most populated metropolitan areas in the U.S., second quarter price increases were greatest in the WinstonSalem Metropolitan Statistical Area (MSA) where prices increased by 4.6 percent.  Prices were weakest in the Birmingham-Hoover, Alabama area where they fell 4.9 percent.  Positive quarterly appreciation was recorded in 74 of the 100 MSAs. 

The FHFA HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.  The agency's expanded-data house price index, a metric that adds transaction information from county recorder offices and the Federal Housing Administration to the HPI data sample, rose 1.3 percent over the prior quarter.  Over the last year, that index is up 6.2 percent. 

FHFA's "distress-free" house price indexes, which are published for 12 large metropolitan areas (page 32), have recently reported lower quarterly appreciation than FHFA's traditional purchase-only indexes.  In half of the areas covered, the series-which removes short sales and sales of bank-owned properties-shows lower appreciation over the last quarter than the purchase-only series.  During the last year, the share of Fannie Mae and Freddie Mac mortgages financing distressed sales has fallen in all but two areas covered by the FHFA indexes.