Average U.S. home prices increased 12.95% between the fourth quarters of 2004 and 2005, according to a recently released report from the Office of Federal Housing Enterprise Oversight.

Arizona recorded the strongest one-year and quarterly growth at 34.9% and 6.99%, respectively. Florida followed with one-year growth of 26.8% and Q4 growth of 5.38%. Hawaii rounds out the top three at respective rates of 23.9% and 5.1%. The rankings are unchanged from the third quarter.

The Midwest continued to record the slowest growth rates. The bottom three states continued to be Nebraska, Ohio and Michigan. One-year growth rates ranged from 4.25% to 3.76%. Quarterly growth rates were 0.27% to 0.7%.

The OFHEO's chief economist Patrick Lawler said, "While deceleration continues in some areas, appreciation generally is still extremely strong. Mortgage rates climbed significantly during the second half of last year, but the effect of that increase on price appreciation so far appears limited."

A report released last week by Countrywide Securities that examined home price appreciation and prepayments suggested that cumulative HPA is the stronger driver of prepayments rather than just the most recent periodic appreciation indicators, "at least in the case for loans without a substantial incentive to refinance." Countrywide believes if appreciation slows from its pace of the past three to five years, it expects speeds on seasoned discount pools to prepay fast relative to new pools.

January new home sales reported by the Census Bureau fell to 1.23 million units, down from December's revised 1.298 million units. January's level, which was below expectations, reflects the lowest seasonally adjusted annual sales rate in a year. The bureau also reported that at the current sales pace, there were enough new homes on the market to satisfy demand for 5.2 months, the highest level since November 1996.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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