A mortgage giant crunched 47 years of housing data. Here’s what it found

A new home price index compiled by Fannie Mae estimates that national home prices were up 20 percent during the first quarter of 2022 — the fastest annual pace of growth in records dating back to 1975.

The Fannie Mae Home Price Index (FNM-HPI) aims to capture a broader picture of the housing market by incorporating third-party home sales data to supplement records maintained by Fannie Mae and its rival, Freddie Mac.

“We have long used this index within the company, including as part of our quarterly financial disclosures, and we believe it will be a highly accurate, timely indicator for measuring home price growth for both economists and housing industry stakeholders alike,” Fannie Mae Chief Economist Doug Duncan said in a statement.

Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA), has long produced what it touts as “the nation’s only collection of public, freely available house price indexes that measure changes in single-family home values based on data from all 50 states and over 400 American cities that extend back to the mid-1970s.”

One limitation of the FHFA House Price Index is that, like an index compiled by Freddie Mac, it only includes transactions on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac.

That means those indexes exclude transactions financed by jumbo loans that exceed Fannie and Freddie’s limits — or non- Qualified Mortgages that don’t meet the mortgage giants’ strict underwriting standards. Homes purchased by buyers using FHA, VA and USDA financing can also be excluded.

Although the S&P CoreLogic Case-Shiller Home Price Indices take in a wider swath of sales price information aggregated from county recorders offices and other sources, that index only goes back to 1987, and data downloads are restricted to registered users.

The S&P CoreLogic Case-Shiller indices are also based strictly on repeat sales of homes over time. While the new Fannie Mae Home Price Index also relies on repeat transaction data, those numbers are supplemented by appraisal data from refinance loans when needed if purchase data is scarce.

Because the appraised values used in refinance loans “are often biased,” Fannie Mae says it employs a “valuation correction” on the refinance data “to adjust the potential systematic valuation bias in appraisal values in refinance data.”

According to Fannie Mae’s description of the methodology used to compile the index, it “makes use of all available transactions data including purchase transactions and refinance transactions data, identifies and corrects the valuation bias in refinance transactions, and ultimately produces a HPI that has lower levels of uncertainty than a HPI estimated by purchase-only transaction data.”

Like other indexes that attempt to track trends in single-family home prices, the Fannie Mae Home Price Index excludes condominium sales, and sales not conducted at “arms length,” such as estate sales, sales between family members, and foreclosure sales.

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Email Matt Carter