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The FMHPI is calculated monthly and released at the end of the following month. For example, the FMHPI for March is published in late April.
The FMHPI is calculated using a repeat-transactions methodology. Repeat transactions indices measure price appreciation while holding constant property type and location, by comparing the price of the same property over two or more transactions. The change in price of a given property measures the underlying rate of appreciation because basic factors such as physical location, climate, housing type, etc., are constant between transactions. Averages of appreciation rates for different geographic areas and time periods are calculated using statistical regressions and the index values are derived from these averages. Download the Technical Descriptions doc for more details.
Freddie Mac uses a dataset that includes valuation and location data for the combined portfolio of loans that were purchased by either Freddie Mac or Fannie Mae since January 1975. This dataset is updated monthly with new purchases from the two firms.
Repeat transactions in this dataset are identified as two first-lien mortgages originated on different dates for the same property address, that are financed by loans purchased by either Freddie Mac or Fannie Mae.
The sample of loans in the dataset covers every state, although it reflects Freddie Mac’s and Fannie Mae’s collective market coverage and thus is not random across states. Furthermore, data are limited to single-family detached and townhome properties that are financed by first-lien conventional and conforming loans. The FMHPI further excludes planned unit developments (PUDs), condominium, and cooperative properties.
Freddie Mac and Fannie Mae are authorized to purchase only conforming loans, or loans that fall below certain dollar limits determined by Congress. For more information on conforming loan limits, visit FHFA’s website.
The FMHPI includes loans originated for home purchases as well as appraisal values for refinance transactions in the data pairs, with the restriction that at least one of the two transactions represents a purchase. In other words, refinance-to-refinance matched pairs are excluded from the calculations. Refinance adjustment terms are included in the regression specification to account for the possibility that appraisal values might systematically differ from purchase prices. These additional transactions greatly increase the power of estimation, especially at smaller levels of geography.
Freddie Mac aggregates the state-level indices in FMHPI to a national index using weights based on the estimated property value underlying active Freddie Mac loans. Freddie Mac portfolio weights equal the estimated property value underlying active Freddie Mac loans in the one- to four-family portfolio (including planned unit developments (PUDs) and condominiums) as of December 31 of the previous year. Portfolio weights are recalculated early in each calendar year, according to the prior end-of-year active loan portfolio. Updated weights are then applied to all index values, not just those of the prior year.
The national FMHPI measures the average appreciation of house values within the currently active Freddie Mac portfolio.
The national, state and Metropolitan Statistical Area (MSA) indices are both seasonally adjusted and not seasonally adjusted.
The national indices differ in two important ways. First, the national FMHPI is a weighted average of state indices, whereas the national CMHPI was a weighted average of nine Census region indices. Second, the FMHPI uses Freddie Mac portfolio share weights to construct the national index, whereas the CMHPI used census region counts of single-family housing.
The FMHPI also differs from the CMHPI in its treatment of refinance transactions. The Classic CMHPI included refinance transactions in the estimation but did not account for disparities between appraisals for refinance purposes and purchases. The FMHPI includes these transactions and uses statistical methods to account for the possibility that appraisal values might systematically differ from purchase prices. The purchase-only CMHPI excluded refinance transactions. Download the Technical Description pdf for more details.
In February 2011, Freddie Mac replaced the CMHPI with the FMHPI as its externally published house price index.
The FMHPI is calculated so that the index value for December 2000 equals 100.
Index values represent the value of single-family housing, relative to the last month in the series. To calculate the growth rate between any two months, simply apply the formula: (I2/I1)-1, where I1 is the index value of the first month and I2 is the index value of the second month.
An index value provided in any given release may differ slightly from indices in subsequent releases. Index values change as new data become available each month because each new data pair influences the index values for each month between transactions. Values for the most recent months typically see the largest revisions because new transaction pairs have a proportionally smaller impact on older values, but larger impact on more recent values, where the number of transactions pairs spanning recent months is relatively small.
The national FMHPI is also revised between Q4 and Q1 of the following year to reflect the recalculation of the geographic weights used for aggregating state indices to a national index. Portfolio weights are recalculated early in each calendar year, according to the prior end-of-year active loan portfolio. Updated weights are then applied to all index values, not just those of the prior year.
The FMHPI uses the most recent Office of Management and Budget (OMB) definition of Metropolitan Statistical Area (MSA).
Freddie Mac began publishing the FMHPI in February 2011. Before then, Freddie Mac published the Conventional Mortgage Home Price Index (CMHPI). The CMHPI is no longer in production or available to the public.
Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac's Economic & Housing Research group, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac's business prospects or expected results. Although the Economic & Housing Research group attempts to provide reliable, useful information, it does not guarantee that the information or other content in this document is accurate, current or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution. Alteration of this document or its content is strictly prohibited. ©2021 by Freddie Mac.
Research Note | September 20, 2021
To follow up on several stories of potential appraisal bias in various news outlets, Freddie Mac kicked off a study of whether minorities are more likely to receive an appraisal value that is lower than the contract price during purchase transactions.