Federal Housing Finance Agency Print
Home / Policy, Programs & Research / Research / Working Paper 16-04: Missing the Mark: House Price Index Accuracy and Mortgage Credit Modeling
Working Papers

Working Paper 16-04: Missing the Mark: House Price Index Accuracy and Mortgage Credit Modeling

Published: 9/27/2016
Author:

​​​Alexander N. Bogin, Senior Economist; William M. Doerner, Senior Economist; William D. Larson, Senior Economist

​Abstract:

We make two contributions to the study of house price index and mortgage credit modeling accuracy. First, we assess the predictive power of house price indices calculated at different levels of geographic aggregation.  Lower levels of aggregation offer superior fit when appreciation rates vary substantially across submarkets and the indices are based on a sufficient number of transactions. Second, we estimate a competing options credit model using 15 years of mortgage performance data in the United States. Model accuracy is highest when using indices at a city or lower level of aggregation to construct current loan-to-value ratios. Fit is weaker when using state or national price indices. Overall, this research highlights the benefits of using more localized house price indices when predicting property values and mortgage performance.

Please cite this working paper when using the annual HPI data for census tracts. Our other local HPI data were made for and described in our Working Paper 16-01. The local HPI data can be downloaded on the HPI Downloadable Data page or with these following links:

Related papers: FHFA Working Paper ​16-01: Local House Price Dynamics​ and FHFA Working Paper ​16-02: Local House Price Growth Accelerations

Attachments:
© 2017 Federal Housing Finance Agency