House Prices Continue Their Ascent

Nationally, house prices continued to rise in February, contributing to the overall recovery in U.S. house prices. According to the most recent release by the Federal Housing Finance Agency, U.S. house prices rose by 0.7% on a month-over-month seasonally adjusted basis in February. This is the thirteenth consecutive monthly increase for the House Price Index – Purchase Only. Over this 13-month period, house prices have risen by 7.4%. Over the past year house prices have risen by 7.1%

The February increase in house prices was geographically widespread, increasing in nearly every division of the country. The Census Bureau uses divisions to segment the four major regions of the country; Northeast, Midwest, South, and West. As Chart 1 illustrates, February house prices increased in each division of the country except the Middle Atlantic region. Despite the February decline, house prices in the Middle Atlantic region are 1.9% higher than when they bottomed out one year ago.

Chart 2 compares national house prices, which began a sustained recovery in 2011, with mortgage applications for purchase, a measure of mortgage demand. According to the FHFA, the House Price Index – Purchase Only is composed of the purchase prices of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac. As the chart below illustrates, the trend in house prices has generally mirrored the trend in mortgage applications for purchase. Prices are moving higher as demand increases from buyers coming back to the market and pushing application volumes up from housing bust lows, levels last seen in the late 1990s. Between January 2011 and February 2013, the HPI – Purchase Only has risen by 6.4%. Meanwhile, the Mortgage Bankers Association’s Mortgage Applications for Purchase Index has risen by 5.8% over this same period.

For full histories of the FHFA US and 9 Census divisions, click here.