The Office of Federal Housing Enterprise Oversight (OFHEO) has released the second quarter (June 30) 2007 Housing Price Index (HPI). HPI data are collected from mortgage purchases by Fannie Mae and Freddie Mac but does not include jumbo loans.

Nationwide, the HPI shows U.S. house prices appreciated 3.2% in the second quarter of 2007 from a year before. OFHEO also said home prices rose only 0.1% in the second quarter from the first quarter, the lowest quarterly increase since 1994.

We use the HPI to compute the Reverse Mortgage Friendliness Index. This measure compares OFHEO’s rates of home value growth over five years to the average interest rate accrued on monthly-adjusting Home Equity Conversion Mortgages (HECM) - the most popular kind of reverse mortgage - for the same period.

A senior homeowner in Miami who who took a HECM reverse mortgage five years ago would have accrued interest on amounts borrowed at an average annual rate of 4.50%. During the same period, the value of his or her home would have appreciated at a 25.06% annual rate - a positive variance of 20.56%. Conversely, a HECM reverse mortgage borrower in Kokomo, IN would have experienced a negative variance (-3.75) over the same period. Of course, the true cost of HECM borrowing is higher than the just the interest rate. Still, the RM friendly measure is a useful tool to help borrowers and potential borrowers assess a reverse mortgage.

California and Florida housing markets continue to be the most “reverse mortgage friendly” when measured over five years, with top ten rankings showing just slight changes from the first quarter 2007 index. However, all top ten markets (except Miami) show negative variances over one year. The recent downturn evident in these markets is more than offset by the remarkably strong gains from 2-5 years ago.

Index of Reverse Mortgage Friendly Communities
		One-Year				Five-Year
Rank	Most Reverse Mortgage Friendly Communities:	Home Value Growth	Avgerage HECM Rate	Variance		Home Value Growth	Avgerage HECM Rate	Variance
1	Miami-Miami Beach-Kendall, FL	7.47	6.51	0.96		25.06	4.50	20.56
2	Bakersfield, CA	0.09	6.51	-6.42		25.05	4.50	20.55
3	Madera, CA	0.67	6.51	-5.84		24.42	4.50	19.92
4	Riverside-San Bernardino-Ontario, CA	1.47	6.51	-5.04		24.22	4.50	19.72
5	Los Angeles-Long Beach-Glendale, CA	2.06	6.51	-4.45		23.20	4.50	18.70
6	Fresno, CA	-2.98	6.51	-9.49		22.18	4.50	17.68
7	Visalia-Porterville, CA	-0.92	6.51	-7.43		21.68	4.50	17.18
8	Fort Lauderdale-Pompano Beach-Deerfield Beach, FL	0.83	6.51	-5.68		21.64	4.50	17.14
9	Lake Havasu City-Kingman, AZ	0.17	6.51	-6.34		21.46	4.50	16.96
10	Naples-Marco Island, FL	-2.86	6.51	-9.37		21.06	4.50	16.56
	Least Reverse Mortgage Friendly Communities:
1	Burlington, NC	-0.83	6.51	-7.34		1.88	4.50	-2.62
2	Saginaw-Saginaw Township North, MI	-0.19	6.51	-6.70		1.88	4.50	-2.62
3	Monroe, MI	-3.91	6.51	-10.42		1.78	4.50	-2.72
4	Flint, MI	-1.88	6.51	-8.39		1.59	4.50	-2.91
5	Warren-Troy-Farmington Hills, MI	-2.78	6.51	-9.29		1.44	4.50	-3.06
6	Greeley, CO	-0.90	6.51	-7.41		1.35	4.50	-3.15
7	Lafayette, IN	0.67	6.51	-5.84		1.10	4.50	-3.40
8	Detroit-Livonia-Dearborn, MI	-3.31	6.51	-9.82		0.89	4.50	-3.61
9	Anderson, IN	0.32	6.51	-6.19		0.81	4.50	-3.69
10	Kokomo, IN	-1.07	6.51	-7.58		0.75	4.50	-3.75

Use the following link to see information on how reverse mortgage friendly your community is. The new OFHEO data has also been uploaded to the state and metro reverse mortgage information tool.

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A Few More Related Articles of Interest:

HPI - House Price Index

OFHEO - Office of Federal Housing Enterprise Oversight

Reverse Mortgages and Home Price Appreciation

Top 10 States for HECM Reverse Mortgages

Index Highlights Best (and Worst) Areas For Reverse Mortgages