FHFA House Price Index: Q1 2023 Reveals Record Highs and Regional Trends

House prices rose 4.3% from Q1 2022 to Q1 2023, raising the House Price Index to an all-time high. 

The Federal Housing Finance Agency (FHFA) just released its House Price Index (HPI®) for Q1 and March of 2023, showing clearly enough that home prices are trending up, largely due to near record-low inventory and stabilizing buyer demand. 

U.S. house prices generally increased modestly in the first quarter. However, year over year prices in many western states have started to decline for the first time in over ten years.

Dr. Anju Vajja

Principal Associate Director in FHFA’s Division of Research and Statistics

HousingWire’s Logan Mohtashami explained why this is happening in a recent article while debunking some popular myths about inventory. 

He also pointed to November 9th, 2022, as an inflection point in the housing market—not because buyer demand reversed course and shot up but because home sales stopped tumbling as they had earlier in the year when mortgage rates soared up to and over 7%.

Home price appreciation data for Q1 2023

Nationwide, we’ve seen positive annual appreciation in each quarter since the beginning of 2012. House prices trended upward in 43 states between Q1 2022 and Q1 2023. 

The five states with the highest annual appreciation in home prices: 

1. South Carolina, 9.5%
2. North Carolina, 9.4%
3. Maine, 8.9%
4. Vermont, 8.8%
5. Arkansas, 8.8%

The five states with the highest annual depreciation: 

1. Utah (-4.3%)
2. Nevada (-3.6%)
3. California (-2.9%)
4. Washington (-2.6%)
5. District of Columbia (-2.3%)

Home prices climbed in 78 of the 100 largest statistical metropolitan areas over the last four quarters. Miami–Miami Beach–Kendall, FL ranked at the top of the list of metros with the biggest annual price increase at 14.1%.

During the same period, San Francisco–San Mateo–Redwood City, CA, had the steepest annual decline in home prices at 10.1%. 

Among the seven U.S. census divisions with positive home price changes, the South Atlantic division ranked at the top, posting the biggest four-quarter home price increase at 7.2% between Q1 2022 and Q1 2023.

In two census divisions, house prices depreciated during that period, with the Pacific division recording a 2.4% drop and the Mountain division coming in second with a 0.1% drop.

Meanwhile, inventory remains historically low

The easiest way to get a conversation started among housing economists right now is to talk about inventory, which, so far this year, is historically low. 

That said, there are those claiming inventory isn’t actually low because, any second now, “shadow inventory” will dump millions of homes into the U.S. marketplace. 

Another popular myth predicts a “silver tsunami” where Boomers list their homes en masse in the space of a month, flooding the market with new listings. 

Both ideas have been around for a hot minute—surviving only because their strongest advocates persist in seeing clues where there are none. 

Mohtashami prefers the Altos Research charts for weekly single-family data because they offer a fresh and accurate look at both active listing and new listing data for the week. This is the reason behind HW’s weekly Housing Market Tracker article. 

New listing data from Altos Research is a critical part of the full picture of housing supply, which is why it’s included as part of the Tracker. 

Even during the home sales collapse of 2022—the most significant ever recorded—new listing data never ballooned as a result. Instead, it trended at all-time lows in both 2021 and 2022. And in 2023, it reached a new all-time low. 

The November 9, 2022 pivot point

The spike in mortgage rates in the spring of 2022 went well beyond the 3% to 5% swing that had become the norm. Jumping from 3% to 7.37% triggered the most dramatic collapse in home sales ever recorded in U.S. history. 

Then, starting November 9th, 2022, mortgage rates started dropping and mortgage demand improved. What happened wasn’t so much a recovery in demand as a stabilization. 

Since then, purchase mortgage application data has had 17 positive prints versus nine negatives after making holiday adjustments. Year to date for 2023, we’ve had roughly as many positive prints as negatives, indicating a stabilization of buyer demand as of the first quarter.

The FHFA House Price Index chart below shows the dramatic cooling of home price growth with higher mortgage rates. But prices didn’t crash the way they did in 2007 and 2008, when active housing supply was much greater than it is now. 

Also, not only was inventory over four million, according to NAR data for 2007, but we also saw a huge influx of forced sellers. 

Massive credit stress put many homebuyers in danger of foreclosure and bankruptcy, especially as many of them were unable to afford their payments on the mortgage loans banks were handing out like candy.

As we prepare for the second half of 2023, tune in to the Hot Sheet for daily updates with the most up to date data on the housing market (positive or negative). 

Read the full FHFA report on Q1 2023 for more details, including the scope and methodology behind the House Price Index (HPI®). 

Takeaways for real estate agents

If you’re not staying on top of housing market data at the local and macro levels—on a daily basis—now is the time to change that. 

For starters, the Hot Sheet should be on your daily watch list. We know there’s a lot to keep track of. But if anyone should be expected to know the housing market and to clearly articulate any changes that could impact the buyers and sellers in your market, it’s you. 

You can also make them aware of the myths floating around about “shadow inventory” and a “silver tsunami.” And show them the data they need to see.