Glossary term
House Price Index (HPI)
A house price index measures changes in home prices over time for a defined market, geography, or data set.
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What Is a House Price Index?
A house price index, or HPI, measures changes in home prices over time for a defined market, geography, or data set. In the United States, the FHFA House Price Index is a widely cited public index tracking changes in single-family home values.
An HPI does not tell you the value of one specific home. It shows price movement across a group of homes using a defined methodology.
Key Takeaways
- A house price index tracks changes in home prices over time.
- The FHFA HPI is based on repeat transactions involving single-family homes.
- Indexes can be national, regional, state, metro, or more local.
- HPI data can help show housing-market trends, but it does not replace an appraisal or local comparable-sale review.
- Different home price indexes can produce different readings because their data sources and methods differ.
How an HPI Works
Many house price indexes compare prices for the same or similar homes across time. The goal is to measure price change rather than simply compare the average price of homes sold in one period with a different mix of homes sold later.
The FHFA describes its HPI as a broad collection of public house price indexes measuring changes in single-family home values, with data extending back to the mid-1970s across all states and hundreds of cities.
Common HPI Uses
User | How an HPI may help |
|---|---|
Homeowners | Understand broad price trends in a market |
Buyers | Compare local appreciation trends before making an offer |
Economists | Track housing as part of the broader economy |
Lenders | Monitor collateral and regional housing conditions |
Investors | Compare housing markets and real estate exposure |
What the Index Can and Cannot Show
An HPI can show whether a market has generally been rising, falling, or flattening. It can also show how one region compares with another over time. That can be useful for housing affordability, real estate planning, mortgage risk, and economic analysis.
It cannot tell you whether a particular home is fairly priced. Condition, renovations, lot, school district, exact location, property type, financing terms, and local supply can all make one property differ from the index.
Comparing HPI Readings
Not all home price indexes measure the same thing. Some use repeat sales, some use appraisals, some focus on conforming mortgages, and some exclude certain property types. Before comparing two index readings, check the geography, data source, property coverage, and whether the series is seasonally adjusted.
For household decisions, an HPI works best as background context. A current appraisal, local comparable sales, and affordability review are still needed for a specific purchase or sale.
The Bottom Line
A house price index measures broad changes in home prices over time. It is useful for spotting housing-market trends, but it should not be treated as a precise valuation tool for one property.