Ann Arbor, MI Federal Housing Finance Agency Home Price Index (FHFA HPI)

The Ann Arbor, MI, Federal Housing Finance Agency (FHFA) house price index (HPI) is a weighted, repeat-sales index that measures average price changes in repeat sales or refinancings on the same properties. The index covers single-family homes with mortgages owned or securitized by Fannie Mae or Freddie Mac.

In the fourth quarter of 2019, the Ann Arbor HPI was up 2.6 percent from the previous quarter and up 5.0 percent from one year earlier. Home prices in the Ann Arbor metro area have been rising steadily since bottoming out in early 2012 and are now at their highest level since 2007.

The main drivers of home prices in the Ann Arbor metro area are strong economic fundamentals, including population growth, job growth, and low mortgage rates. The metro area’s population has grown by more than 5 percent since 2010, while job growth has averaged nearly 3 percent per year over the same period. Mortgage rates have remained low by historical standards, despite rising somewhat from their post-recession lows.

These strong fundamentals have helped to offset some of the headwinds facing the housing market, such as tight credit conditions and high home prices relative to incomes. While credit conditions have improved somewhat in recent years, they remain tighter than before the financial crisis for many would-be borrowers with less-than-perfect credit scores or limited savings for a down payment. In addition, home prices in the Ann Arbor metro area are now about 30 percent higher than their long-term average relative to incomes (measured as median house price divided by median household income). This affordability challenge is likely to limit demand from first-time buyers and other lower-income households going forward.