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FNC Index: Home Prices of Normal Sales Up 0.4% in January 

Below is this month’s update to the FNC Residential Price Index http://www.fncrpi.com/ written by Yanling Mayer, a senior research economist at FNC. It looks like prices are continuing to rise in most of the metro areas covered by the index, but at a slower pace than in previous months. A few markets slipped back a little, but that is probably mostly due to the seasonal slow-down. To view the article with accompanying charts and graphs click here.

The latest FNC Residential Price Index™ (RPI) shows U.S. home prices have gotten off to a positive start in 2014, rising a modest 0.4% in January. The index, constructed to gauge the price movement among normal home sales exclusive of distressed properties, indicates home prices of the underlying housing market continue to strengthen as market fundamentals and credit conditions continue to improve. The index is up 9.0% from a year ago and continues to point to the fastest year-over-year growth to date since the recovery began. Home prices are expected to rise modestly in February as improving signs are emerging in the for-sale market: The for-sale market has strengthened in February and the average seller asking price discount dropped from 5.4% in January to 4.7% in February. 

FNC’s RPI is the mortgage industry’s first hedonic price index built on a comprehensive database that blends public records of residential sales prices with real-time appraisals of property and neighborhood attributes. As a gauge of underlying home values, the RPI excludes final sales of REO and foreclosed homes, which are frequently sold with large price discounts, likely reflecting poor property conditions. 

Based on recorded sales of non-distressed properties (existing and new homes) in the 100 largest metropolitan areas, the FNC national composite index shows that in January home prices rose at a seasonally adjusted rate of 0.4%. The two narrower indices (30- and 10-MSA composites) show faster month-over-month price appreciation in the nation’s top housing markets, up 0.6% and 0.8%, respectively. The 30- and 10-MSA composites’ year-over-year trends also show more rapid growth in the double digits and, similar to the national index, the fastest year-over-year growth to date since the recovery began. 

The chart below shows the latest price trends in each individual MSA contributing to the FNC Composite 30. Nearly half of the nation’s top housing markets recorded a sizable gain in January, led by Atlanta, Denver, and Cincinnati at roughly 2.0%, followed by Houston, Los Angeles, San Diego, Phoenix, and Tampa at close to 1.0%. Prices declined in seven markets, led by Nashville, Baltimore, and Sacramento. Much of this observed price decline is attributable to seasonal fluctuations.  

After four consecutive months of zero to negative growth, home prices in Denver regained traction and rose 1.9% in January. In Miami, Riverside (CA), Seattle, and Orlando, home prices are rising rapidly, up 9.6%, 8.0%, 6.1%, and 6.0%, respectively, in the last six months, followed by San Francisco (5.8%), Las Vegas (5.6%), and San Diego (5.3%). While momentum has subsided, the Phoenix market continues to show positive price growth, likely reflecting low inventory. Home prices in St. Louis and Baltimore have remained depressed with continued price declines. Despite low foreclosure sales, the D.C. market remains surprisingly flat in recent months. Year over year, all 30 markets (except St. Louis) show positive price gain that averages 10.7%. There is a great deal of variations among them, however, ranging from 27.4% in Sacramento to less than 1.0% in Columbus.