According the Federal Home Finance Agency’s Home Price Index, home values are now off just 12.5 percent from their April 2007 peak nationwide.  This, after a half-percent monthly increase in prices in May, on average.

Given the state of the market since April 2007, the Home Price Index results are a positive for both the housing market and the economy, but we have to remember that May’s half-point increase is an average, and not specific to a particular area.

In contrast to “national markets”, the real estate markets in which you and I live are decidedly local.  It’s a major difference and the distinction renders the Home Price Index somewhat less important. 

After all, the HPI doesn’t account for housing activity in individual neighborhoods like Indian Hill , nor does it track value across cities like Cincinnati. Instead, it summarizes data in giant chunks of geography.

A quick look at the HPI regional data proves the point. Of the HPI’s 9 tracked regions, only one was within one-tenth of one percent of the national, half-point average.  The others varied by as much 1.3 percent.

As a sample:

• Mountain Region : + 1.7 percent
• New England : + 0.2 percent
• South Atlantic : +1.0 percent

And this is on a regional basis. The HPI’s applicability to state, city and neighborhood markets is even less appropriate.

Real estate values cannot be captured in a national survey. For home buyers and seller, what matters is the economics of a block, on a street, in a neighborhood.  That type of granularity can’t be tracked in a report like the Home Price Index.

The best place to get that data is from a local real estate agent that knows the market well.

Last week, the Case-Shiller Index reported home values up 0.8 percent across 20 tracked markets. The public-sector Federal Housing Finance Agency has reached a similar conclusion.

Reporting on a two-month lag, the government’s Home Price Index shows home values up 0.8 percent in April, buoyed by the expiring federal home buyer tax credit and low mortgage rates.  It’s a positive signal for a recovering housing market — in Cincinnati and everywhere else.

But just because the Home Price Index says home values are rising, that doesn’t mean they are. The Home Price Index methodology is flawed on multiple fronts.

First, the Home Price Index reports on a 60-day delay. This two-month lag turns the HPI a trailing indicator for the housing market instead of a forward-looking one. If you’re a home buyer looking for direction, HPI won’t give it to you — you’ll have to get that analysis from your real estate agent.

Second, HPI only accounts for home values in which the home’s attached mortgage is backed by Fannie Mae or Freddie Mac.  As the FHA market share grows, fewer homes get included in the HPI sample set, and HPI values may be skewed high or low.

And, third, HPI doesn’t account for new home sales — only repeat ones.  This, too, eliminates a major segment of the market.

All of that said, though, the Home Price Index remains important to housing.  It’s still the most comprehensive home valuation model in print and it’s been giving strong readings since the start of year.  You can’t ignore that on any level.

It’s July and you may have missed the “rock bottom” Hyde Park home prices from earlier in the year, but homes are still relatively inexpensive. Couple that with all-time low mortgage rates and home affordability looks excellent. Consider making an offer while the terms are right.

Home values rose in March, according to the Federal Home Finance Agency’s most recent Home Price Index. Values were reported higher by 0.3 percent, on average, from February.

We use the phrase “on average” because the Home Price Index is broad-reaching, national housing statistic. It ignores the dynamics of neighborhood real estate markets like Hyde Park as well as citywide markets like Cincinnati , too.

Instead, the Home Price Index focuses on state and regional statistics.

For example, in March 2010 as compared to February:

• Values in the East South Central region rose 2.5%
• Values in the Mountain states rose 1.1%
• Values in the Middle Atlantic states fell 1.0%

Of course, none of this data is especially helpful for today’s home buyers and sellers.

Real estate is a local phenomenon that can’t be summarized by state or region. What matters most to buyers and sellers is the economics of a neighborhood and that level of granularity can’t be served up by a national housing report like the Home Price Index.

The Home Price Index data is additionally unhelpful to buyers and sellers in that it reports on a 2-month delay.

In other words, Home Price Index is not even a fair reflection of today’s market — it highlights the real estate market as it existed 60 days ago.

So why is the Home Price Index even published? Because government, business and banks rely on the reports.  As a national indicator, the Home Price Index helps governments make policy, businesses make decisions, and banks make guidelines. This, in turn, trickles down to Main Street where it impacts every one of us — and eventually influences real estate.

Since peaking in April 2007, the Home Price Index is off 13.44 percent.

Home values fell again in January, according to the Federal Home Finance Agency’s Home Price Index. Values were reported down 0.6 percent, on average.

We say “on average” because the Home Price Index is a national report. It doesn’t capture the essence of a local market like Mt Lookout , or even a city market like Cincinnati.

The most granular that the monthly Home Price Index gets is regional and January’s report shows that:

• Values in the Mountain states rose 2.0%
• Values in the Pacific states were flat
• Values in the East North Central states fell 1.8%

It’s hardly helpful for home buyers entering the market, or home sellers trying to properly price a home.  Furthermore, because the Home Price Index reports on a 2-month delay, its data fails to reflect the current market conditions.

Versus January — the period from which HPI data is collected — mortgage rates are lower, buyer activity is up, and the federal home buyer tax credit is closer to expiring.  These each can have an impact on housing.

Ultimately, national real estate data like the Home Price Index is best suited for lenders and policy-makers.  National data helps to identify trends that shape formal policy, but it doesn’t help you, specifically. 

Since peaking in April 2007, the Home Price Index is off 13.2 percent.

Earlier this week, the private-sector Case-Shiller Index showed home prices slightly lower between November and December.  Thursday, the public-sector Home Price Index showed the same.

Publishing on a 2-month lag, the Federal Home Finance Agency said home prices fell by 1.6 percent nationally in December.  And that’s an average, of course.  Some regions performed well in December as compared to November, others didn’t.

• Values in the Middle Atlantic states improved slightly
• Values in New England were essentially unchanged
• Values in the Mountain states sagged, down 3.5%

These aren’t just footnotes. They’re an important piece toward understanding what national real estate statistics really mean. In short, “national statistics” are just a compilation of a bunch of local statistics.

For example, if we dig deeper into the FHFA Home Price Index 70-page report, we find that cities like Terre Haute, IN, Buffalo, NY, and Amarillo, TX posted year-over-year home price gains. You won’t see that in a “national” report.

Furthermore, it’s a sure bet that those same cities, you could find neighborhoods that are thriving, and others that are not.  Just because the city shows higher home values overall, it won’t necessarily be the case for every home in the city.

Every street in every neighborhood of every town in America has its own “local real estate market” and, in the end, that’s what should be most important to today’s buyers and sellers.  National data helps identify trends and shape government policy but, to the layperson, it’s somewhat irrelevant.

So, when you need to know whether your home in Cincinnati is gaining or losing value, you can’t look at the national data.  You have to look at your block — what’s selling and not selling — and start your valuations from there.