Buying a house in the U.S. cost 8.5 percent more in October of this year than it did in the same month last year, according to the Federal Housing Finance Board.
The average price of a one-family house rose to $264,540 last month, the FHFB
reported, citing its latest survey data. In October 2003, the average price
The October 2004 data are based on 23,466 reported loans from 77 lenders, representing
savings institutions, mortgage companies, and commercial banks.
The FHFB is required by statute to provide average house prices, month by
month. Also by statute, Fannie Mae and Freddie Mac determine for the upcoming
year the maximum size loan that they can purchase, known as the conforming loan
limit, based on the average house price information provided by the Finance
The Federal National Mortgage Association Charter Act and the Federal Home
Loan Corporation Act make reference to the October average house price. The
Housing and Community Development Act of 1980 amended both of these acts to
include a provision that allows both enterprises to adjust each year the maximum
size of mortgage loans that they can purchase based on the percent change in
the October average house price compared with the October average house price
in the previous year.
The average house price is based on a monthly survey of major lenders that
report to the Finance Board the terms and conditions on all conventional, single-family,
fully amortized, purchase-money loans closed during the last five working days
of the month. The data exclude FHA-insured and VA-guaranteed mortgages, refinancing
loans, and balloon loans.
The Federal Housing Finance Board implemented several methodological changes
to its Monthly Interest Rate Survey (MIRS) in January 2003. Those changes were
published in the Federal Register on December 27, 2002, and their effect explained
in more detail in subsequent communications with both Fannie Mae and Freddie
Based on parallel testing from August 2001 through December 2002, the Finance
Board estimated the average effect of those methodological changes was to increase
the reported average house price by $1,647. To appropriately compare the October
2003 average house price to the October 2002 average house price, the enterprises
should have subtracted $1,647 from the October 2003 survey data, but that one-time
adjustment was not made last year when the enterprises calculated the conforming
loan limit for 2004.
Had the enterprises made the $1,647 adjustment to the October 2003 average
house price, the conforming loan limit for 2004 would have been 2.71 percent
greater than the 2003 limit, not 3.41 percent greater as calculated by the enterprises.
In calculating the conforming loan limit for 2005, the percent change in unadjusted
average house prices from October 2003 to October 2004 should be applied to
the corrected conforming loan limit for 2004.