U.S. home prices posted record declines in the fourth quarter of 2008 according to the Federal Housing Finance Agency’s House Price Index (HPI). The FHFA seasonally-adjusted purchase-only house price index, based on data from home sales, was 3.4 percent lower on a seasonally-adjusted basis in the fourth quarter than in the third quarter. This decline was greater than the 2.0 percent decline in the third quarter and the largest in the purchase-only index’s 18-year history. Over the past year, seasonally-adjusted prices fell 8.2 percent from the fourth quarter of 2007 to the fourth quarter of 2008.
FHFA’s all-transactions House Price Index, which includes data from home sales and appraisals for refinancings, showed significantly less weakness over the latest quarter than the purchase-only index. The all-transactions HPI fell 0.2 percent in the latest quarter. It was down 4.5 percent over the four-quarter period, the largest four-quarter drop in the index, which extends back to 1975. These data reflect trends as of Dec. 31, 2008.
FHFA has also included its monthly house price index through December 2008. Prices increased 0.1 percent from November to December on a seasonally-adjusted basis after a downward adjustment for November and are down 10.9 percent since their April 2007 peak.
“Price declines continued in the fourth quarter although not as rapidly as some had expected,” said FHFA Director James B. Lockhart. “We are hopeful the housing initiatives announced last week by President Obama will begin to provide much-needed stability to the housing markets.”
While the national purchase-only house price index fell 8.2 percent between the fourth quarters of 2007 and 2008, prices of other goods and services rose 1.4 percent. Accordingly, the inflation-adjusted price of homes fell approximately 9.6 percent over the latest year.
Click here  for a full copy of the report.
The quarter’s Highlights article updates an analysis that was provided in the last HPI discussing alternative weighting systems that might be used in constructing the national house price index. This release uses data through the fourth quarter to produce an alternative, state-weighted national index and compares that index against the standard Census Division weighted index. FHFA continues to study options for reweighting the
FHFA’s purchase-only and all-transactions house price indexes track average house price changes in repeat sales or refinancings of the same single-family properties. The purchaseonly index is based on more than five million repeat sales transactions, while the alltransactions index includes more than 36 million repeat transactions. Both indexes are based on data obtained from Fannie Mae and Freddie Mac for mortgages originated over the past 34 years.
FHFA analyzes the combined mortgage records of Fannie Mae and Freddie Mac, which form the nation’s largest database of conventional, conforming mortgage transactions. The conforming loan limit for mortgages purchased since the beginning of 2006 has been $417,000. Loan limits for mortgages originated in the latter half of 2007 through December 31, 2008 were increased to as much as $729,750 in high-cost areas in the
continental United States. The American Recovery and Reinvestment Act, passed on Feb. 16, 2009, extended those limits for 2009 originations in places where those limits were higher than those originally calculated for 2009.
This HPI report contains four tables: 1) A ranking of the 50 States and Washington, D.C. by House Price Appreciation; 2) Percentage Changes in House Price Appreciation by Census Division; 3) A ranking of 292 MSAs and Metropolitan Divisions by House Price Appreciation; and 4) A list of one-year and five-year House Price Appreciation rates for MSAs not ranked. Note that the Office of Management and Budget (OMB) announced three new MSAs in late 2008: Cape Girardeau-Jackson, MO-IL, Manhattan, KS, and
Mankato-North Mankato, MN. Metropolitan area index series are now available for these
* PDF: FHFA Fourth Quarter House Price Index 
* FHFA’s House Price Calculator 
* E-mail: FHFAinfo@FHFA.gov  for a printed copy of the report
* Next FHFA Monthly HPI: March 24, 2009
* Next FHFA Quarterly HPI: May 27, 2009
The Federal Housing Finance Agency  regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.