U.S. house prices rose 1.4 percent in the fourth quarter of 2014 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI). This is the fourteenth consecutive quarterly price increase in the purchase-only, seasonally adjusted index. FHFA’s seasonally adjusted monthly index for December was up 0.8 percent from November.

House prices rose 4.9 percent from the fourth quarter of 2013 to the fourth quarter of 2014. The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac.

“Contrary to prior indications of a possible slowdown, home price appreciation in the fourth quarter was relatively strong,” said FHFA Principal Economist Andrew Leventis. “The key drivers of appreciation over the last few years—low inventories of homes available for sa​le and improvement in labor markets—likely played a role in driving up prices during the quarter.”

FHFA’s expanded-data house price index, a metric that adds transaction information from county recorder offices and the Federal Housing Administration to the HPI data sample, rose 1.3 percent over the prior quarter. Over the last year, that index is up 6.0 percent. For individual states, price changes reflected in the expanded-data measure and the traditional purchase-only HPI are compared on pages 17-19 of this report.

The seasonally adjusted, purchase-only HPI rose 4.9 percent from the fourth quarter of 2013 to the fourth quarter of 2014 while prices of other goods and services rose only 0.4 percent. The inflation-adjusted price of homes rose approximately 4.5 percent over the latest year.

Significant Findings:

  • ​​Between the fourth quarter of 2013 and the fourth quarter of 2014, the seasonally adjusted, purchase-only HPI rose in 48 states and the District of Columbia. The top five areas in annual appreciation: 1) District of Columbia: 12.5 percent; 2) Nevada: 9.0 percent; 3) North Dakota: 8.4 percent; 4) Colorado: 7.9 percent; and 5) Michigan: 7.8 percent.
  • ​As measured with purchase-only indexes for the 100 most populated metropolitan areas in the U.S., fourth quarter price increases were greatest in the San Francisco-Redwood City-South San Francisco, CA area, where prices increased by 6.0 percent. Prices were weakest in the El Paso, TX MSA, where they fell 6.6 percent.
  • Of the nine census divisions, the Mountain division experienced the strongest increase in the fourth quarter, posting a 1.8 percent quarterly increase and a 5.5 percent increase since last year. House price appreciation was weakest in the New England division, where prices fell .03 percent.
  • The monthly seasonally adjusted, purchase-only index for the U.S. has increased for 23 of the last 24 months (November 2013 showed a decrease).

FHFA’s “distress-free” house price indexes, which are published for 12 large metropolitan areas (page 33), have shown lower quarterly appreciation in the last several quarters than FHFA’s traditional purchase-only indexes. In more than half of the areas covered, the new series—which removes short sales and sales of bank-owned properties—shows lower quarterly appreciation than the purchase-only series in the fourth quarter.