At a REALTOR® University Speaker Series held recently, Dr. Will Doerner, Senior Economist, Federal Housing Finance Agency (FHFA), presented research on how prices changed from 1990—2015 at the city, county, and ZIP code level.
Several price indices and price measures are available from survey data and proprietary sources, but the price indices developed by a team of FHFA researchers are the first and only set of constant quality house price indices at the local level with a 40-year horizon. They estimate these constant quality price indices using a repeat sales (“sales on the same property”) methodology so the change in the index captures only the price effect and not the effect due to changes in the quantity and type of housing. The local price indices are freely available to the public at the metropolitan/micropolitan (over 900 areas), county (over 2,700 counties), 5-digit ZIP code (over 18,000 ZIP codes), and census tract (over 54,000 tracts) levels. Click here to go to FHFA’s webpage and download the local price indices.
Map 1 below shows the price indices at the ZIP code level as of 2016 based on prices in 2000. An index of 175 means that prices were 75 percent higher in 2016 compared to their levels in 2000 (or an average annual growth of 3.6 percent). Areas colored in red experienced the fastest cumulative price growth, while areas in green had the lowest price growth. Many of the high growth areas are in the West and Midwest region.
Another research finding is that large cities experienced less severe price declines during the housing bust than did small cities which saw steeper price declines. In other words, large cities are less prone to housing busts than small cities.
The FHFA research also suggested an increasing preference for cities and away from suburbs, a trend that started in the 1990s after the migration to the suburbs in the 1970’s-1980. Houses that are closer to the central business district (CBD) have prices rising at a faster pace compared to houses located farther away from the city center. For example, houses within less than five miles of the CBD of a large city (more than 500,000 housing units) rose at two percent more annually from 1990-2015 compared to houses located at 20 miles away from the CBD.
Perhaps most importantly in relation to FHFA’s role as regulator and conservator of Fannie Mae and Freddie Mac, ZIP code level price indices yield lower house price forecast errors compared to price indices at a higher level of aggregation (e.g. state level HPIs), thereby improving the evaluation of a borrower’s credit risks.
What This Means to REALTORS®: REALTORS® can use the FHFA local price indices as additional sources of information in evaluating home price changes in their local areas and in comparing the changes in home prices over time and across other areas.
About the Speaker
Dr. Will Doerner is responsible for House Price Index (HPI) production and related research. He is a Commissioner for the Prince George's County Planning Board and previously served on the Hyattsville Planning Committee. Before joining FHFA, he worked in property appraisal and valuation for both state and county agencies in Florida. He has published over a dozen articles in academic journals on a range of topics like finance, housing, property taxation, and policing. Several papers have received “best paper” recognitions from professional organizations and publishers.
Dr. Doerner earned his Ph.D. and M.S. in Economics from Florida State University, where he also taught classes on housing markets and land use regulations. He received his B.S. in Mathematics-Economics and Urban Studies at Furman University. Dr. Doerner’s curriculum vitae can be found here. You can follow Dr. Doerner at @wdoerner and email him at William.Doerner@fhfa.gov.
About REALTOR® University Speaker Series
REALTOR® University provides on-line education on real estate and other topics at the MBA and undergraduate levels. The REALTOR® University Speaker Series provides a venue to learn about and stimulate discussion of economic and real estate issues in support of NAR’s mission as the Voice of Real Estate. The Speaker Series presentations can be accessed on this webpage.
 Held on March 24, 2017 at the NAR Washington D.C. Office. Measuring House Prices: Going Local with Indices, Cycles, and Modeling
 Based on a series of co-authored papers with FHFA economists Alexander Bogin and William Larson.
 Thanks to Meredith Dunn, Communications Manager, for creating the webinar material.
 Includes NAR’s median price on existing home sales, Case-Shiller indices, and American Community Survey, CoreLogic, among others.
 Dr. Doerner presented data from 1990-2015, but 2016 data is available from the FHFA website.
 The annual growth from 2000-2016 can be estimated as (175/100)1/16-1 or 3.6 percent. FHFA also generates indices based on 1990 prices.
 The U.S. Census defines a large city as one with more than 500,000 housing units.
 Dr. Doerner noted that ZIP Code and county level HPIs are best to use when running credit risk models for large cities (500,000 or more housing units). For small cities or outside of the central areas of a large city, metro-level (or city) HPIs yield low forecast errors also.