U.S. FHFA House Price Index Posts Modest Increase

• Employment decline weakens wages.

• Prices paid fall

The Federal Housing Finance Agency (FHFA) Price Index increased 0.3% m/m in January after an upwardly revised 0.7% m/m gain in December (initially 0.6%). Prices rose 5.2% in January from a year earlier, down from an upwardly revised 5.4% y/y in December. Over the past three months, prices are up 5.6% at an annual rate versus 5.8% in December.

Prices across the nine census divisions generally rose in January with a 0.2% m/m drop in the Mountain region and a 0.1% m/m decline in the West North Central region the only declines. The Atlantic regions posted the strongest monthly gains with prices in the South Atlantic rising 0.7% m/m and prices in the Middle Atlantic region increasing 0.6% m/m.

Compared to a year ago, all census divisions posted higher prices, led by a 6.4% y/y rise in the South Atlantic region and a 6.1% y/y increase in the Mountain region. The Middle Atlantic region posted the weakest annual gain with a 4.1% y/y increase.

Note that these data are for January and are unlikely to have been impacted by the coronavirus outbreak. That effect is still to come.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancings on the same kinds of properties. The indexes are based on transactions involving conforming, conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included. The FHFA data are available in Haver's USECON database.

• The housing market remains weak.

• Financing rates are low.

The Mortgage Bankers Association reported that its Mortgage Loan Application Index eased 0.3% (+70.0% y/y) in the week ended April 17 after the prior week's 7.3% increase. Applications for refinancing slipped 0.8% w/w (+225.3% y/y) after improving 10.1% in the previous week. Purchase applications increased 2.1% w/w but fell by roughly one-third y/y.

The effective interest rate on a 15-year fixed-rate mortgage of 3.12% was little changed over the last three weeks. The effective interest rate on the 30-year fixed-rate mortgage of 3.54% was close to the record low for the series which dates back to 1990. The effective rate on a 30-year Jumbo mortgage edged up to 3.91% from 3.87%. The rate on the 5-year adjustable rate mortgage declined to 3.23% and reversed the increases of the prior five weeks.

The average mortgage loan size declined to $305,800 (-6.3% y/y). That was down from the $367,900 high reached early in March. The average loan size of refinancings fell sharply to $301,600 (-2.9% y/y) from $372,100, a high last month. The average loan size for purchases rose slightly to $318,500 (-5.4% y/y) but also was below its early-March high.

Home buyers and owners continue to lock in currently low levels of interest rates. Applications for fixed-rate loans increased 87.5% y/y, while applications for adjustable rate loans fell 21.3% y/y.

The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for each index is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's SURVEYW database.