Home Price Acceleration Continues at a Rapid Pace - 9/13/2004 - Mortgage Loan Refinance Debt Equity

Home Price Acceleration Continues at a Rapid Pace

The four-quarter increase on the agency’s House Price Index was the highest since 1979.

“These data show no signs of the long-anticipated, and ultimately inevitable, slowing of house price inflation,” said Patrick Lawler, OFHEO’s chief economist.

“House prices may become increasingly vulnerable to potential sustained higher interest rates in the future,” he added, “but that has not happened so far.”

House price gains over the one-year period were more than three times higher than prices of non-housing goods and services in the Consumer Price Index, which rose 3.3%.

In general, housing analysts have been expecting the rate of price appreciation to slow as mortgage rates turned upward, but increases in the price of financing have been relatively small and erratic so far this year.

Interest rates on 30-year mortgages began climbing in mid-March from a low of 5.38% and moved into the 6.3% range by early May. However, they reversed direction in mid-June and have remained below the 6% level since the beginning of August as the general economy hit what the Federal Reserve has characterized as a “soft patch” brought on by high oil prices.

House appreciation in this year’s second quarter was 2.21%, or an annualized rate of 8.83%, and was 50% higher than the upwardly revised 1.45% increase in the first quarter.

Among the 50 states and the District of Columbia, the top 10 for price appreciation through the one-year period ending on June 30 were: Nevada (up 22.92%), Hawaii (18.9%), California (18.39%), Rhode Island (17.86%), the District of Columbia (16.07%), Maryland (15.4%), Florida (14.23%), New Jersey (12.75%), Virginia (12.21%) and Maine (12.01%).

No state saw a decline in home prices; the bottom 10 states were: Utah (2.58%), Texas (2.91%), Indiana (3.05%), Alabama (3.26%), Colorado (3.51%), Tennessee (3.79%), Ohio (3.79%), North Carolina (3.85%), Mississippi (3.95%) and Michigan (3.99%).

Among metropolitan areas, Las Vegas saw the most substantial price gain; houses there increased by 24.94%.

Experiencing price gains of more than 20% were: Riverside-San Bernardino, CA; Fresno, CA; Fort Pierce-Port St. Lucie, FL; Orange County, CA; Los Angeles-Long Beach; Ventura, CA; Bakersfield, CA; San Diego; and Reno, NV.

The softest metro housing market in the country was Austin-San Marcos, TX, where prices climbed 1.05%.

Metro markets with home price appreciation below 2% were: Elkhart-Goshen, IN; Lafayette, IN; Provo-Orem, UT; Boulder-Longmont, CO; Hickory-Morganton-Lenoir, NC; and Fort Wayne, IN.