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Economy in Brief

U.S. FHFA House Prices Fall for the Second Straight Month in August
by Winnie Tapasanun  October 25, 2022

• FHFA HPI -0.7% m/m in August, the second monthly drop since May 2020.

• House prices fall m/m in seven of nine census divisions; house prices in New England rebound while in the West North Central region house prices were unchanged.

U.S. house prices fell 0.7% m/m in August after an unrevised 0.6% decline in July and a 0.1% uptick in June, according to the Federal Housing Finance Agency (FHFA) House Price Index. The August reading was the second monthly fall since May 2020's -0.3%. Rising mortgage rates put pressure on demand, weakening house price growth. Importantly, the Fed's aggressive tightening of monetary policy is continuing to temper the previous house price rises. During the June 2020 to May 2022 period, house prices had risen between 0.9% (the lowest in September 2021) and 1.9% (the highest in February 2022). The year-on-year rate of increase decelerated to 11.9% in August, the lowest since December 2020, from 13.9% in July.

The month-on-month decline in house prices was evident with prices falling in August in seven of the nine census divisions: Mountain (-2.0%), Pacific (-1.3%), Middle Atlantic (-0.8%), South Atlantic (-0.7%), East North Central (-0.6%), East South Central (-0.3%), and West South Central (-0.1%). House prices in the West North Central region held steady m/m in August after declines of 0.1% in July and 0.6% in June. To the upside, house prices in New England rose 0.4% m/m in August after drops of 1.1% in July and 0.5% in June.

Year-on-year house prices continued to rise in August, but the pace of advance decelerated in eight of the nine census divisions. Among the eight census divisions showing deceleration, the slowest annual increase was posted by the Pacific region at 7.4% in August (vs. 10.0% in July) while the South Atlantic region reported the largest annual rise at 16.2% in August (vs. 19.0% in July). New England was an exception with its y/y rate accelerating to 12.2% in August from 11.6% in July.

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.

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