The Office of Federal Housing Enterprise Oversight reported significant home price growth in its quarterly survey on price appreciation released last week. Over the 1Q04 through 1Q05 period, the OFHEO reported average U.S. home prices rose 12.5% - the largest appreciation since the 3Q04 survey, when it printed at a 13.40% clip. First quarter appreciation was 2.21%, or an 8.82% annualized rate.

States recording the largest price increases over the year were Nevada at 31.2%, followed by California at 25.4%, and Hawaii at 24.4%. The District of Columbia, Florida and Maryland also recorded appreciation of over 20%. The states with the slowest home price appreciation included Oklahoma at 4.1%, Indiana at 4.1%, and Texas at 3.8%.

OFHEO also noted that Arizona's annual house price appreciation accelerated significantly in the last year - increasing 19.4% versus 7.7% in the preceding year. Utah also made significant gains, moving up to 35th from last among all states in 4Q03.

In cautionary remarks, OFHEO's Chief Economist Patrick Lawler stated, "The House Price Index shows the rise in house prices continues at an extremely strong pace and raises the potential for declines in some areas later on." The continued strength in home price appreciation is due to low interest rates, income growth, and "the apparent impact of speculation in some real estate markets," he added.

Meanwhile, Freddie Mac also reported last week that its Conventional Mortgage Home Price Index rose an annualized 9.6% in the first quarter. This compares to a revised 9.7% increase in the 4Q04, and a 17.6% jump in the 3Q04. Over the period from 1Q04 through 1Q05, Freddie's Conventional Index was up 11.8%, similar to OFHEO's average of 12.5%.

By region, the Pacific states recorded the largest quarterly and annual gains. For the quarter, prices were up 4% for an annualized rate of nearly 17%. For the period from 1Q04 through 1Q05, home prices surged 19.2%. The South Atlantic and Mountain states recorded an annualized 12.7% quarterly change, and a 15.3% and 11.9% annualized change, respectively. The regions recording the slowest annualized quarterly change included the West South Central area at 0.6%. These states also had the lowest annual increase at 3.7%.

Freddie Mac Chief Economist Frank Nothaft attributed the attractive gains in home prices to the low mortgage rate environment. However, he noted that, "national annual home price growth is likely to slow in 2005." He added that this is showing up as the 1Q05 quarterly growth rate is down about half from last fall.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.