Home-price appreciation was up 12.3 percent in the third quarter on an annualized basis due to low mortgage rates, which kept home sales up, according to Freddie Mac’s national conventional mortgage home-price index.
House-price growth nationally was up from 10.5 percent in the first quarter of 2005, and 9.8 percent from the fourth quarter 2004, with the South Atlantic and Mountain states leading in appreciation levels.
“The steady decline of fixed mortgage rates during the second quarter helped to propel home sales higher and drive up house prices,” said Frank Nothaft, Freddie Mac vice president and chief economist.
The average weekly rate for 30-year fixed-rate mortgages fell from a high of 6.04 percent the week of March 31 to a low of 5.53 percent the week of June 30, Nothaft said, and home sales in the second quarter soared to an annualized record level of 7.62 million units.
Home-price growth continues to show strength along the coasts, according to the Freddie Mac index.
Nothaft said home sales and housing starts are expected to set new records this year, and that the devastating effects of Hurricane Katrina would likely drive up costs of construction materials once rebuilding efforts commence. This may slow deliveries of new homes in other areas of the country, he said, as resources are reallocated to areas affected by the storm.
“It is too soon to know the full impact on the economy from the storm,” Nothaft said. “Home sales in areas not affected by hurricane Katrina should remain strong and support continued home-price appreciation, especially since interest rates have fallen in recent weeks.”
He added that prior experience in Florida shows that home prices in hurricane disaster areas fall temporarily before recovering. “We hope that will be the case here,” he said.
Nationally, home values increased 12.1 percent on an annual basis, from the third quarter of 2004 through the third quarter of 2005. The South Atlantic and Mountain states were tied for first place in annual house-price appreciation, growing at a rate of 19.5 percent each.
Those two regions were followed by the Pacific states, which grew at a slower, but still robust pace of 15.2 percent for the year. The Middle Atlantic states came next with growth at an annual appreciation rate of 13.3 percent.
The East South Central states followed the Middle Atlantic states with an annual home-price growth rate of 18.2 percent. After the East South Central states came the New England states, which experienced an increase of 7.8 percent while the East North Central states saw an increase of 6.6 percent. Finally, the West South Central states had gains of 6.2 percent and the West North Central states had the slowest annual appreciation of 6 percent annually.
This quarter’s release of the index is the first to use the new metro area definitions based on the 2000 Census and expands the index coverage to 379 metropolitan statistical areas.
“We can now see more clearly the impact of localized job losses or job gains on smaller communities with the wider coverage,” said Amy Crews Cutts, Freddie Mac deputy chief economist. “Most of the job losses have come from the manufacturing sector while employment gains have occurred consistently in construction, and home price trends have mirrored the employment trends.”
“Four metro areas are showing losses in home values year over year, but no state is currently showing either quarterly or annual decreases in average home values,” she said.
Index values and growth rates for the nation as a whole as well as for the nine Census divisions, the 50 states and the District of Columbia, and 390 metropolitan statistical areas and metropolitan divisions can be found on Freddie Mac’s Web site, http://www.freddiemac.com/finance/cmhpi/.
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