House Prices Continue Their Ascent

Eye on Housing

Data released by the Federal Housing Finance Agency (FHFA) indicates that house prices rose by 0.6% on a seasonally adjusted basis over the month of February 2014. In addition, previous estimates of house price gains in January, 0.5%, and in December, 0.7%, were marked down slightly; to 0.4% and 0.6% respectively. February marks the 3rd consecutive monthly increase and the 24th increase in the past 25 months for FHFA’s House Price Index – Purchase Only. Over this 25-month period, the House Price Index – Purchase Only has risen by 15.0% and is now at roughly the same level as in June 2005.


National house price appreciation is taking place because most areas of the country are experiencing house price increases. However, many regions of the country recorded monthly house price changes, up or down, that deviated significantly from the 0.6% national average. As the figure below illustrates, house…

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Interest Rates Headed Higher

Troubled Assets

Interest Rates Headed Higher Interest rates have gone up in the recent past. With that, there are those out there waiting for rates to go back down. Unfortunately, they may have to wait decades for that to happen. Future interest rates, as projected by Freddie Mac, are shown in this graph. As time progresses, buyers will have to pay progressively higher interest rates.

When talking about this, some people ask me if these higher interest rates will cause home prices in the Portland metro area to go back down. Higher interest rates will definately create a headwind for housing prices (most buyers buy the payment, not the house price, and a higher interest rate will increase the monthly payment). At the same time, however, economic growth in Portland has been increasing, its unemployment rate decreasing, and the general mood of the market is more optimistic. Further, with our current level of low inventory (3.1…

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