FHFA Purchase Only House Price Index – What Goes Up, Must Come Down

The spectacular home price surge seen in the wake of the anomalous pandemic economic period is now beginning to abruptly reverse.

Today’s release of the Federal Housing Finance Administration (FHFA) House Price Index indicated that the Purchase Only repeat sale index of single family properties (similar to the Case-Shiller but with Fannie Mae and Freddie Mac home sale transactions) has begun to decelerate notably in recent months with the index falling to a still bubbly 16% annual percent change.

While prices are still rising notably, the trend appears to be abruptly changing as mortgage rates continue to climb bringing higher costs, tighter lending standards and more economic uncertainty.

Given the truly anomalous surge in home prices seen since the start to the pandemic, it appears pretty clear that we are now seeing an equal but opposite deceleration in prices that will more than likely end in a spectacular home price bust as inventories continue to mount and housing finance continues to tighten.

The following data visualization (click for dynamic version) shows the Annual Percent Change of the Single Family Purchase Only Index (in blue).