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National home values fall in fourth quarter

National Mortgage Professional
Mar 24, 2014

National home values fall in fourth quarterMortgagePress.comFreddie Mac, Conventional Mortgage Home Price Index, appraisals

First consecutive quarters of decline since 1982
Freddie Mac announced that its Conventional Mortgage Home Price Index (CMHPI) classic series registered a 0.5 percent drop in U.S. home values during the fourth quarter of 2007 on an annualized basis, up from a revised third quarter 2007 annualized rate of 1.5 percent, and the first consecutive quarters of decline since 1982. Over the year, ending with the fourth quarter, home values appreciated 0.3 percent on average, down from the 6.2 percent growth over the same period a year earlier.

The CMHPI classic series includes data from both home purchase transactions and mortgage refinances based on appraisals. Freddie Mac also produces a CMHPI purchase-transactions only series, which indicates that home sales prices fell 9.3 percent nationally during the fourth quarter on an annualized basis; the last time a larger drop was recorded was during the third quarter of 1972. Over the four quarters, ending in December 2007, home sales prices fell an average of 0.9 percent in the CMHPI purchase-transactions only series.

"The financial market turmoil that started in the third quarter continued into the fourth, making it harder to get mortgage financing for a home purchase or refinance, and foreclosures continued to rise, putting additional stress on the inventory of homes for sale," said Frank E. Nothaft, Freddie Mac vice president and chief economist. "Reporting on their survey of commercial bank lending practices, the Federal Reserve noted that 64 percent of reporting banks had seen a large reduction in the demand for home purchase mortgages in the last three months of the year, which is consistent with the weakness in home prices we are seeing now. More than 50 percent of banks reported tightening their lending standards on prime mortgage loans for home purchases and none eased standards."

Nothaft also said: "To be sure, there are still many homes being bought and sold in the U.S., with 5.01 million one-family homes, excluding condos, sold in the fourth quarter on an annualized basis, roughly the rate we saw in 1997. But the buyers are in the driver's seat today, and they are demanding both price reductions and seller concessions to make a deal."

"The decline in home values occurred in every region in the U.S. according to the CMHPI purchase-only measure, and only four states posted gains in home values during the fourth quarter—Maine, North Dakota, South Dakota and West Virginia. The Pacific region fell the most, at a 17.2 percent annualized rate, led by declines in home values in California of nearly 25 percent on an annualized basis. Over the past twelve months, home values declined 4.2 percent in the Pacific region. In contrast, a robust energy industry in the oil-patch states fueled a 3.2 percent annual gain in house prices in the West South Central region," added Amy Crews Cutts, deputy chief economist at Freddie Mac.

Based on the CMHPI classic series, the East South Central states led growth in home values with an annualized appreciation rate of 3.5 percent during the fourth quarter, followed by the West South Central states, which showed a smaller gain of 3.1 percent. The West North Central states came next, with a growth rate of three percent. The East North Central states experienced a price growth of 2.8 percent while the Mid-Atlantic region saw a positive growth rate of 1.5 percent. This was followed by a 1.2 percent rate of growth in the New England region and a drop of 0.1 percent in the Mountain states. The South Atlantic states saw a drop in average values of 0.6 percent, and the Pacific region saw home values slip 8.1 percent.

The CMHPI classic series shows the following regional performances:

•The East South Central division (Alabama, Kentucky, Mississippi and Tennessee) increased 0.9 percent (3.5 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values have increased 4.2 percent, and during the last five years, home values have increased 31.5 percent.
•The West South Central division (Arkansas, Louisiana, Oklahoma and Texas) increased 0.8 percent (3.1 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values have increased 4.6 percent, and during the last five years, home values have increased 30.1 percent.
•The West North Central division (Iowa, Kansas, Minnesota, Montana, North Dakota, Nebraska and South Dakota) increased 0.7 percent (three percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values have increased 1.5 percent, and during the last five years, home values have increased 27.5 percent.
•The East North Central division (Illinois, Indiana, Michigan, Ohio and Wisconsin) increased 0.7 percent (2.8 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values have increased 0.2 percent, and during the last five years, home values have increased 21.3 percent.
•The Middle Atlantic division (New Jersey, New York and Pennsylvania) increased 0.4 percent (1.5 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values have increased 1.1 percent, and during the last five years, home values increased 56.6 percent.
•The New England division (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont) increased 0.3 percent (1.2 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values have decreased 0.9 percent, and during the last five years, home values have increased 37.9 percent.
•The Mountain division (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming) increased zero percent (-0.1 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values have increased 1.9 percent, and during the last five years, home values have increased 52.4 percent.
•The South Atlantic division (Washington, D.C., Delaware, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia) decreased 0.2 percent (-0.6 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values have decreased 0.3 percent, and during the last five years, home values have increased 56.9 percent.
•The Pacific division (Alaska, California, Hawaii, Oregon and Washington) decreased 2.1 percent (-8.1 percent, annualized) in the fourth quarter of 2007. Over the last 12 months, home values have decreased three percent, and during the last five years, home values have increased 69.7 percent.

For more information, visit www.freddiemac.com.

Published
Mar 24, 2014