The Latest FHFA Q2 2023 House Price Index:
Things Are Looking Good…
But First, A Quick Glance Back
Over the past few months, we’ve all fixated on the volatility within the market, most specifically about increasing rates that have lingered around 7%, save for a fleeting dip or two into the 6.5% range. We have also discussed the impact on buyers and sellers: the latter being caught in the “golden handcuffs” and unwilling to sell and give up their 3-4% rates—and the former being ever so cautious, to the point of paralysis. Although there are certainly opportunities for the savvy and astute buyer, inventory levels remain low, making things more tricky. All that to say, sellers can count on a relatively profitable listing due to limited housing, whereas patient buyers can find good deals now before rates go down again and fierce competition ensues.
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Now for the FHFA: What Q2 2023 Tells Us
Things are not bad, not bad at all, according to the latest Federal Housing Finance Authority (FHFA) Home Price Index (HPI) Report. That is a welcomed relief from the wild ride that began in 2022 and has bled into 2023. As a topline, let’s consider the following:
- U.S. house prices notched a 3.0% annual gain between Q2 2022 and Q2 2023.
- House prices increased in 42 states YoY, with Maine and Connecticut leading the pack, each boasting a 7.6% appreciation.
- Despite negative media buzz, home prices are actually on the upswing and expected to keep climbing. A recent Home Price Expectation Survey by Pulsenomics polled experts who agree prices are projected to rise consistently through 2027.
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Let’s Take a Deeper Dive
Monthly Housing Price Index
If you look at the monthly HPI from January 1991 to the present, you’ll see a steady, almost 45° turn upward marred only by several significant life events: “The Great Recession” of 2007-2008 and Covid. “The Shift” that has occurred more recently (June 2022) is due to rising interest rates and affordability issues. Still, things are trending in the right direction as this graph clearly demonstrates. Appreciation and home values are reflecting a steady climb, which bodes well.
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Monthly House Price Index for U.S.
January 1991 – Present
Source: FHFA HPI
California Home Prices Ease Up
Although much of the nation is safely in “the Blue”, the Pacific and Mountain divisions saw minor declines of 2.0% and 2.1%, respectively, but they’re making a comeback on a quarterly basis—and trending up YOY. California YOY Price Appreciation is -2.14% and the Greater Los Angeles YOY Appreciation is -1.69%.
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Four-Quarter House Price Change by State
U.S. Four-Quarter Appreciation = 3.0% (2022 Q2 – 2023 Q2)
Source: FHFA HPI
What Experts Project for Home Prices Over the Next 5 Years
Despite the negative buzz, home prices are actually on the upswing and expected to keep climbing. A recent Home Price Expectation Survey by Pulsenomics polled experts who agree—that prices are projected to rise consistently through 2027.
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Estimated Home Price Performance
December to December, as Forecasted in Q3 2023
Source: HPES
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What’s Next For 2024?
Not even the experts can say with absolute certainty where mortgage rates will be next year or even next month. That’s because there are so many factors that can impact what happens. So, to give you a lens into the various possible outcomes, here’s what you should consider:
If you buy now and mortgage rates don’t change:
You made a good move since home prices are projected to grow with time, so at least you beat rising prices.
If you buy now and mortgage rates fall (as projected):
You probably still made a good decision because you got the house before home prices appreciated more. And you can always refinance your home later if rates are lower.
If you buy now and mortgage rates rise:
You made a great decision because you bought before both the price of the home and the mortgage rate went up.