US & World Economies What Is the House Price Index (HPI)? The House Price Index (HPI) Explained in Less than 4 Minutes By Danielle Zanzalari Updated on May 7, 2022 Reviewed by Erika Rasure Reviewed by Erika Rasure Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. learn about our financial review board In This Article View All In This Article Definition/Examples of The House Price Index How Does the House Price Index Work? Home Price Index vs. the Case-Shiller Index Photo: MoMo Productions / Getty Images Definition The House Price Index (HPI) is an index from the Federal Housing Finance Agency (FHFA) that tracks the value of single-family homes. The House Price Index (HPI) is an index from the Federal Housing Finance Agency (FHFA) that tracks the value of single-family homes. The index has measured home values from information from purchases and refinances in all 50 states and more than 400 U.S. cities since the mid-1970s. Let’s take a closer look at how the House Price Index (HPI) is calculated, and how it serves as an economic indicator by identifying trends in the housing market. Definition and Examples of The House Price Index The House Price Index (HPI) is a gauge of changes in single-family home values dating from the mid-1970s to the present by using a weighted analysis. It measures the average price change in repeat sales or refinancing of the same property. The House Price Index is considered a “constant quality” index because the difference in the quality of housing is controlled by tracking the same properties over time. The HPI is not adjusted for inflation, so it reflects nominal gains. The data includes tens of millions of home sales in the U.S. Since the index tracks home sales over time, it provides insight into house price changes at the national, census, state, metro, county, and ZIP code levels. Note The House Price Index reports, released monthly and quarterly, are free and publicly available. The index is often used to aid journalists or researchers studying, for example, business cycles, demographic changes, aggregate demand, and local government budgets. For example, the fourth-quarter 2021 HPI report revealed that the five states with the highest annual price appreciation as of December 2021 were 1) Arizona 27.4 percent; 2) Utah 27.1 percent; 3) Idaho 27.0 percent; 4) Florida 25.6 percent; and 5) Tennessee 24.1%. How Does the House Price Index Work? The HPI is a free, publicly available gauge of housing prices in the U.S. from the FHFA. The index is calculated based on single-family mortgages that are purchased or securitized through Fannie Mae and Freddie Mac, which are the largest mortgage finance institutions in the United States. The HPI index reports are released on a monthly, quarterly, and annual basis. Note The Federal Housing Finance Agency regulates Fannie Mae and Freddie Mac, so it has access to their mortgage data. In an expanded-data index, the HPI includes loans that are not purchased or securitized by Fannie Mae and Freddie Mac. The HPI provides a tool for understanding housing market trends, which play a significant role in the economy. For example, researchers may use the HPI to understand changes in housing affordability, prepayments, and mortgage defaults. In the chart below, you can see the HPI trends over the decades since its inception. How Home Prices Affect Inflation Home prices have an effect on overall inflation and deflation. The consumer price index (CPI) is one of the most widely used measures of inflation and deflation in the United States. Home prices are among the factors that go into the CPI. The Home Price Index vs. the Case-Shiller Index The HPI is similar to the S&P/Case-Shiller U.S. National Home Price Index, but it has some differences. The HPI is an index maintained by the Federal Housing Finance Agency and includes loans purchased or securitized through Fannie Mae and Freddie Mac. Note The Case-Shiller Index obtains its information from county assessor and recorder offices. It uses purchase prices in index calibration and not refinance appraisals like the Home Price Index does. The Case-Shiller Index is a value-weighted index because the price trends for more-expensive homes have a greater influence on estimated price changes than lower-priced homes. In contrast, the HPI is unweighted and treats all homes equally. While these indices are different, they both provide a gauge for the general rise and fall of housing prices, and are both economic indicators. Key Takeaways The House Price Index (HPI) is a gauge of housing prices, tracking the purchases and refinances of single-family homes from the mid-1970s to today.Produced by the Federal Housing Finance Agency (FHFA), the HPI reports are free and publicly available.The House Price Index is considered a “constant quality” index because the difference in the quality of housing is controlled by tracking the same properties over time. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Federal Housing Finance Agency. “FHFA House Price Index.” Federal Housing Finance Agency. “FHFA House Price Index Frequently Asked Questions.” Federal Housing Finance Agency. “OFHEO House Price Indexes : HPI Technical Description.” Federal Housing Finance Agency. "FHFA House Price Index (HPI) Quarterly Report, 2021 Q4 & December 2021," Page 1.