House price appreciation slows furtherMortgagepress.comHouse Price Index, appreciation
According to figures released by the Office of Federal Housing
Enterprise Oversight (OFHEO) as part of the House Price Index
(HPI), a quarterly report analyzing housing price appreciation
trends, U.S. home prices rose in the third quarter of this year,
but the rate of increase continued to slow and some areas
experienced actual price declines. Nationally, home prices were
7.73 percent higher in the third quarter of 2006 than they were one
year earlier. Appreciation for the most recent quarter was 0.86
percent, or an annualized rate of 3.45 percent. This reflects a
further slowdown from what was reported for the second quarter,
when the quarterly appreciation rate was 1.3 percent and the
annualized rate was 5.1 percent. The quarterly increase is the
lowest since the second quarter of 1998.
"Our newest data confirm last quarter's data that the housing
market is in a decidedly different stage," said OFHEO Director
James B. Lockhart. "With U.S. house prices growing less than one
percent during the third quarter, it provides more evidence that
the long-forecasted national deceleration in house prices is
occurring. Given the five-year appreciation prior to this quarter
of 56.8 percent, the slowdown is not unexpected. There are still
some areas where appreciation rates remain very high, but now they
are the exception rather than the norm."
Since the spring of 2004, year-over-year house price
appreciation has fallen from a peak of 13.9 percent to 7.7 percent
this quarter. Despite the deceleration, house prices grew faster
over the past year than did prices of non-housing goods and
services reflected in the Consumer Price Index (CPI). CPI prices
rose 3.1 percent.
The findings of the third quarter HPI show varying trends in
different parts of the country.
1. The quarterly appreciation rate fell in seven of the nine
Census divisions. The West North Central and East North Central
divisions had small increases over weak second quarters.
2. Five states - New York, Rhode Island, Michigan, New Hampshire
and Massachusetts - saw price declines from the second to the third
quarter of the year.
3. Michigan was the first state to show a year-over-year decline
in more than six years. Prices fell 0.6 percent in Michigan between
the third quarter of 2005 and the third quarter of 2006.
4. Appreciation rates remain at or near record-setting rates in
areas affected by Hurricane Katrina. Baton Rouge, La.,
Gulfport-Biloxi, Miss. and Mobile, Ala. all had their highest
four-quarter appreciation rates ever with four-quarter price growth
of 14.1, 23.3 and 17.5 percent, respectively.
5. Idaho now tops all states with the highest four-quarter
appreciation rate with prices 17.5 percent higher in the third
quarter of 2006 than they were a year earlier. Other states with
large year-over-year increases were Utah (17.4 percent), Oregon
(16.9 percent) and Arizona (16.4 percent).
6. Quarterly price declines occurred in more than half of the
cities in California. Fifteen of 25 California cities in OFHEO's
list of ranked Metropolitan Statistical Areas and divisions
experienced price declines relative to the second quarter.
"House prices continued to rise through the third quarter in
most of the country, but generally at only low or moderate rates,"
said OFHEO Chief Economist Patrick Lawler. "The transition from
sizzling markets to normal or weak markets has been orderly so far,
and recent drops in interest rates lessen the likelihood that
precipitous changes will occur."
OFHEO's House Price Index is published on a quarterly basis and
tracks average house price changes in repeat sales or refinancings
of the same single-family properties. Changes in the mix of data
from refinancings and house purchase transactions can affect HPI
results. An index using only purchase price data indicates somewhat
less price appreciation for U.S. houses between the third quarter
of 2005 and the third quarter of 2006. That index increased 6.0
percent, compared with 7.7 percent for the HPI.
For more information, visit www.ofheo.gov.