Lancaster, PA Federal Housing Finance Agency Home Price Index (FHFA HPI)

The Lancaster, PA, Federal Housing Finance Agency (FHFA) House Price Index (HPI) is a weighted, repeat-sales index measuring average price changes in single-family houses with mortgages backed by Fannie Mae or Freddie Mac. The HPI value for a particular quarter represents the movement of prices between that quarter and the corresponding quarter of the previous year. For example, if the HPI for Lancaster County in the first quarter of 2020 is 103.0, this means that home prices in Lancaster County increased by 3.0% from the first quarter of 2019 to the first quarter of 2020.

The HPI is based on data from Fannie Mae and Freddie Mac's Single-Family Mortgage Database (SFMD). The SFMD contains information on all conventional single-family mortgage transactions purchased or securitized by Fannie Mae or Freddie Mac since January 1, 1975. The database includes information on both purchase mortgages and refinance mortgages.

The HPI is constructed using a "repeat sales" methodology, which means that it tracks price changes for individual properties over time rather than tracking changes in median prices or other measures of central tendency. This methodology has several advantages over other approaches:

1) It eliminates the problem of "composition bias," which can occur when comparing median prices across different geographic areas. For example, suppose that home prices in two counties are both increasing at a rate of 5% per year. However, in County A, most of the homes that are selling are low-priced homes while in County B, most of the homes that are selling are high-priced homes. In this case, even though both counties have experienced similar overall price increases, the median price increase in County A would be lower than the median price increase in County B because low-priced homes have generally increased less in value than high-priced homes. By tracking individual properties rather than medians or other measures of central tendency, the HPI avoids this problem altogether.

2) It captures not only changes in market conditions but also changes in individual properties themselves (e.g., improvements made to a property). This is important because it allows us to see how much of an impact changing market conditions have on home values as well as how much impact individual homeowners can make through renovations and other improvements.