New Haven-Milford, CT Federal Housing Finance Agency Home Price Index (FHFA HPI)

The New Haven-Milford, CT, 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 and condominiums in the nine-county New Haven-Milford metropolitan area.

Between 2000 and 2006, home prices in the New Haven-Milford metro area more than doubled, from an index value of 100 to a peak of 213.9 in the second quarter of 2006. Since then, prices have fallen sharply, reaching a low of 124.4 in the first quarter of 2011. As of the fourth quarter of 2019, prices had recovered somewhat but were still below their pre-recession levels, at 158.8 (see Figure 1).

The run-up in prices was driven by strong economic and demographic fundamentals as well as easy credit conditions. The metro area’s economy was growing rapidly during this period, fueled by job growth in the financial services sector and rising incomes. The population was also growing as people moved to the area for jobs and to be closer to family members who had already relocated there. At the same time, mortgage interest rates were at historic lows and lending standards were lax. These factors combined to create conditions that were ripe for a housing price bubble.

When the bubble burst, prices fell sharply as demand for housing weakened and foreclosures increased. The metro area’s economy slowed as job losses mounted in the financial services sector and elsewhere. Population growth also slowed as people moved out of the area in search of jobs or because they could no longer afford their mortgages. As prices fell, many homeowners found themselves “underwater” on their mortgages – owing more than their homes were worth – which made it difficult to sell or refinance their loans. This further exacerbated the decline in prices by reducing mobility among homeowners and limiting opportunities for new buyers to enter the market through purchases of distressed properties at bargain prices