House Price Index

House Price Index

The Housing Price Index (HPI) measures the evolution of family home prices over time across a particular country. HPI reports help people understand and estimate whether houses will get cheaper or more expensive, and how much they will pay on the mortgage of their loans.

Many countries around the world use House Price Indexes. For instance, the Federal Housing Finance Agency (FHFA) monitors all shifts in nationwide house prices throughout the U.S, using data from Fannie Mae and Freddie Mac*. This event is important for the financial markets, and it's marked in the economic calendar.

*According to fhfa.gov, Fannie Mae and Freddie Mac are government-sponsored companies responsible for boosting the housing market by providing liquidity, stability, and affordability to the mortgage sector.


The U.K. calculates changes in residential homes, including properties in Scotland, Northern Ireland, Wales, and England. For Great Britain, the Halifax House Price Index* is essential.

* The Halifax House Price Index is a leading indicator of health in the housing sector, measuring the change in the price of homes and properties financed by Halifax Bank of Scotland.

For the E.U., Eurostat is responsible for issuing these reports, by gathering statistics from each country’s official source. Data resulted from these releases are compared on a year-over-year basis or quarterly basis.


The House Price Index and its economic implications

The House Price Index is connected to the economy, influencing key factors such as inflation, GDP, and even interest rates.

Monetary policy experts and economists use HPI reports to understand future and current economic trends and how they could impact various markets. For example, the House Price Index is an excellent inflation predictor, which can, in turn, affect interest rate decisions from central banks.

House Price Index figures can impact a country’s Gross Domestic Product (GDP) as well. An increase in house prices leads to job growth, higher consumer spending, improved GDP numbers, and an overall economic surge. In the U.S. alone, the housing markets contribute to approx. 20% of GDP during prosperous times.

Declines in real estate markets lead to prices tumbling out for houses, mortgage loan values go down, and consumer spending drops. Because consumer spending accounts for 70% of GDP in, let's say, the U.S., the economic impact can be substantial.

Housing Price Index and Forex


Since we already mentioned HPI’s impact on currencies, it’s time to learn how you can interpret data for your day-to-day trading on the Forex market.

Here’s what you need to know:

When inflation levels are low, banks cut interest rates, and when inflation is high, interest rates go down

Increased inflation may weaken a country's currency. Still, people are more inclined to keep their money in banks due to more significant returns, and demand rises on the Forex market for that particular currency.

In conclusion, as House Price Indexes are connected to inflation, each report can cause volatility in the currency markets. Traders value HPI announcements such as house price index charts in the U.K., U.S. or E.U. Additionally, politics, natural disasters, interest rate decisions or unexpected market developments can contribute to the overall HPI figures and the whole state of the economy.

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House Price Index and the stock market

Rising or falling economies can influence both the stock and the housing markets, but studies haven’t shown conclusive results about the connection between these two markets.

The only certainty is when prices soar tremendously, increasing by double-digit over a short timeframe. For instance, when a bubble hits the House Market and homes get 20-30% more expensive, the stock markets usually go the same way, impacting several industries and sectors. But, as we all know, the bubble does burst sooner or later.

Also, traders should keep in mind that stock market volatility can prevent people from making home-buying decisions, dragging real estate businesses down, and stocks related to them as well. In turn, the implications can be more complex financial instruments like U.S. Indices (Dow Jones, S&P 500 or Nasdaq).


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Source: economy.com, ec.europa.eu, investopedia.com, investing.com, marketwatch.com

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Users/readers should not rely solely on the information presented herewith and should do their own research/analysis by also reading the actual underlying research. The content herewith is generic and does not take into consideration individual personal circumstances, investment experience or current financial situation.

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