U.S. home prices continued to rise in August with prices increasing 0.3 percent over July, according to the Federal Housing Finance Agency (FHFA) monthly Housing Price Index (HPI) released today. However, the July increase of 1.0 percent was revised downward to 0.8 percent from previously reported.
Even with the revision, this is the 19th month in a row that the HPI has been up. The index is calculated using home sales information from mortgages either sold to or guaranteed by Fannie Mae or Freddie Mac and does not include cash sales or those financed through other methods.
Short inventory of existing homes for sale and the lack of new construction has added fuel to home prices in the past few months," according to Craig McKenzie, Realtor(r) with Windermere Whidbey Island Real Estate. "Even with slightly higher prices, the continuation of low mortgage rates coupled with the previous reset in prices back to 2000-2003 levels, still make it a heck of a time to buy!"
Over the past year, August to August, home prices are up 8.5 percent but the U.S. index is still 9.4 percent below the April 2007 peak. The Pacific division (one of 9 census divisions) shows the most growth at 18.2 percent over the past 12 months. California and Nevada, two of the hardest hit in the housing bust, are part of the Pacific division and now leading in increased values.
Statistical data showing housing improvement or decline is compiled each month by the FHFA and distributed on a regular basis. The FHFA regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.5 trillion in funding for the U.S. mortgage markets and financial institutions.
Part of the reason that mortgage rates have continued to stay on the low side has been the continued purchasing of mortgage backed securities (MBS) by the Federal Reserve. The Fed had announced that they would slow down and finally stop purchasing MBS but that changed after the government shutdown this month. Mortgage securities are generally thought to be Fannie and Freddie associated, but MBS sales also fund the FHA and VA loan pools. This are called Ginnie Mae bonds and have been falling in issuance lately, largely, in my opinion, to the hike in mortgage insurance premium charged by FHA.
Overall, most experts feel that it is an excellent time to purchase a home and waiting will probably mean higher prices and higher interest rates. Additionally, with a shortage of homes on the market in many areas and increased values, it is also a good time to consider selling your home.
About the author: Fred Chamberlin was a senior loan officer with Guild Mortgage Company in Oak Harbor. He was in the mortgage origination business for over 20 years and in the lending business for over 30 and authors a number of mortgage related blogs.