The OFHEO Price Index is a home price index originally compiled by the Office of Federal Housing Enterprise Oversight (OFHEO). In September 2008, this function was transferred, and the index has since been known as the House Price Index (HPI) under the Federal Housing Finance Agency (FHFA).
Origin and Purpose
The index comprises data from loans purchased or securitized by two government-sponsored enterprises (GSEs): Fannie Mae and Freddie Mac. These entities facilitate mortgage credit for homeowners, and the data reflects a wide range of housing markets.
Calculation Methodology
The OFHEO Price Index calculates home prices based on repeat-sales data, which entails examining the price changes of the same property over successive sales. This methodology helps mitigate the volatility caused by changes in the mix of homes sold in the market.
Historical Context and Transition
- Pre-September 2008: The index was managed by OFHEO, an independent entity.
- Post-September 2008: The function of OFHEO was absorbed by the FHFA, and the series was renamed the House Price Index (HPI).
Key Components of the Index
Data Sources
- Fannie Mae and Freddie Mac loans: The dataset includes conventional, conforming mortgage transactions.
- Geographical Segmentation: The values are disaggregated to reflect home price indices for each state and metropolitan area across the United States.
Index Series Labels
- House Price Index (HPI): The current label for the index as recognized post-September 2008.
Importance and Applications
Market Analysis
- Real Estate Trends: Analysis of the index helps in understanding geographical price trends over time.
- Economic Indicators: Used by economists and policymakers to gauge housing market health.
Financial Uses
- Mortgage Lending: Lenders may use the index to make decisions regarding mortgage portfolios.
- Housing Market Forecasts: Predictive modeling for future real estate investments and economic planning.
FAQs
What is the geographical scope of the OFHEO Price Index?
How often is the index updated?
What is the significance of the transition from OFHEO to FHFA?
Related Terms
- Fannie Mae (Federal National Mortgage Association): A GSE created to expand the secondary mortgage market.
- Freddie Mac (Federal Home Loan Mortgage Corporation): Another GSE aimed at promoting stable mortgage markets.
- Repeat-Sales Methodology: A technique used in real estate to estimate price indices by tracking sales prices of the same property over time.
References
Summary
The OFHEO Price Index, now known as the House Price Index (HPI) under the FHFA, plays a crucial role in the analysis of home prices across the United States. This index, built from data on loans facilitated by Fannie Mae and Freddie Mac, provides valuable insights for real estate professionals, policymakers, and economists. Understanding its calculation, historical background, and applications is essential for anyone involved in the housing market.
