House Price Appreciation Continues At Robust Pace

OFHEO House Price Index Shows Annual Rise of Nearly 13 Percent; Unprecedented Increases in 26 Metropolitan Areas


FOR IMMEDIATE RELEASE
March 1, 2006

WASHINGTON, D.C. – Average U.S. home prices increased 12.95 percent from the fourth quarter of 2004 through the fourth quarter of 2005. Appreciation for the most recent quarter was 2.86 percent, or an annualized rate of 11.4 percent. The increase during 2005 is similar to the revised increase of 12.55 percent for the year ended with the third quarter of 2005, showing no evidence of a slowdown. The figures were released today by OFHEO Acting Director Stephen A. Blumenthal, as part of the House Price Index (HPI), a quarterly report analyzing housing price appreciation trends.

“Despite recent indications that a slowdown may be forthcoming, house price appreciation during 2005 continued to hover at near-record levels,” said OFHEO Chief Economist Patrick Lawler.

House prices continued to grow considerably faster over the past year than did prices of non-housing goods and services reflected in the Consumer Price Index. House prices rose 12.95 percent, while prices of other goods and services rose only 4.3 percent.

“While deceleration continues in some areas, appreciation generally is still extremely strong,” said Lawler. “Mortgage rates climbed significantly during the second half of last year, but the effect of that increase on price appreciation so far appears to be limited.”

This HPI report ranks 10 additional Metropolitan Statistical Areas (MSAs) due to an increase in the number of mortgage transactions in those areas.

Significant findings in the HPI:

1. Four-quarter appreciation rates were at record levels in 26 metropolitan areas including Orlando-Kissimmee, FL; El Paso, TX; and Myrtle Beach-Conway-North Myrtle Beach, SC.

2. Phoenix-Mesa-Scottsdale, AZ continues to be the MSA with the greatest appreciation rate of 39.7 percent.
3. Appreciation in Arizona continues to surpass price growth in other parts of the country by a wide margin. Appreciation was 34.9 percent between the fourth quarter of 2004 and the fourth quarter of 2005. This is more than eight percentage points greater than the rate in Florida, the second fastest appreciating state.
4. The Mountain Census Division became the fastest appreciating area of the country, edging out the Pacific Census Division. The area with the slowest price growth continues to be the East North Central Division, which includes Michigan, Wisconsin, Illinois, Indiana and Ohio.
5. Price growth in the South Atlantic Census Division which includes East Coast states from Maryland to Florida, was at its highest rate since 1975, the beginning of the period covered in OFHEO’s House Price Index. Home prices grew by 17.81 percent between the fourth quarter of 2004 and the fourth quarter of 2005.
6. For the first time since the third quarter of 2003, one of the MSAs included in OFHEO’s appreciation-rate ranking experienced a four-quarter price decline. Prices in Burlington, NC fell by approximately one percent between the fourth quarter of 2004 and the fourth quarter of 2005.

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 fourth quarter of 2004 and the fourth quarter of 2005. That index increased 10.81 percent, compared with 12.95 percent for the HPI.

The MSAs newly ranked in this HPI report are identified in http://www.ofheo.gov/media/pdf/NewRankedMSAs05q4.pdf.

In addition, this release incorporates name changes for a small number of MSAs and Metropolitan Divisions, to reflect changes by the Office of Management and Budget. These name changes are described in OMB Bulletins 06-01 and 05-02 and the affected cities are set forth in the file:
http://www.ofheo.gov/media/pdf/MSAChanges05q4.pdf.

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.

OFHEO’s index is based on analysis of data obtained from Fannie Mae and Freddie Mac from more than 31.2 million repeat transactions over the past 31 years. OFHEO analyzes the combined mortgage records of Fannie Mae and Freddie Mac, which form the nation’s largest database of conventional, conforming mortgage transactions. The conforming loan limit for mortgages purchased in 2005 was $359,650. The limit for 2006 is $417,000.

This HPI report contains four tables: 1) A ranking of the 50 States and Washington, D.C. by House Price Appreciation; 2) Percentage Changes in House Price Appreciation by Census Division; 3) A ranking of 275 Metropolitan Statistical Areas (MSAs) and Metropolitan Divisions by House Price Appreciation; and 4) A list of one-year and five-year House Price Appreciation rates for MSAs not ranked.


OFHEO’s HPI report in PDF form is accessible at www.ofheo.gov. Also, be sure to visit www.ofheo.gov to use the OFHEO House Price calculator. The next HPI report will be posted June 1, 2006. Please e-mail ofheoinquiries@ofheo.gov for a printed copy of the report.


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Contact Information

Corinne Russell

Office of Federal Housing Enterprise Oversight

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