Housing Market Still Going Strong
June 2, 2005
First Quarter Appreciation Up 9.6 Percent On An Annualized Basis
McLean, VA – Freddie Mac (NYSE: FRE) announced today that its quarterly national Conventional Mortgage Home Price Index (CMHPI) rose 9.6 percent in the first quarter on an annualized basis, down from a revised fourth quarter 2004 annualized rate of 9.7 percent and a third quarter 2004 rate of 17.6 percent.
"Low mortgage rates and brisk home sales led to an annualized 9.6 percent rate of house price appreciation in the first quarter," said Frank Nothaft, Freddie Mac vice president and chief economist. "Even though interest rates on adjustable-rate mortgages came up a bit, 30-year, fixed mortgage rates remained at an average of just 5.8 percent over the first three months of the year and fixed-rate mortgages still make up the majority of the mortgage market; 67 percent of new mortgage applications in the first quarter were for fixed-rate mortgages according to the Primary Mortgage Market SurveySM."
The Conventional Mortgage Home Price Index (CMHPI) continues to show strong growth primarily along the coasts – areas where populations are growing rapidly, jobs growth is strong and land scarcity is pushing up the cost of housing.
"As strong as home sales and new home construction were last year, this year is off to an even stronger start," said Nothaft. "Sales of new and existing houses and pre-owned condominiums averaged an annualized total of 8.1 million units sold in the first quarter.
"National annual home price growth is likely to slow in 2005. Our best estimate is that house price growth will moderate to between six percent and nine percent as interest rates climb higher. We are already seeing some slowing in the quarterly growth rates relative to autumn of last year when home prices were growing at nearly double the current rate."
Nationally, home values increased 11.8 percent on an annual basis, from the first quarter of 2004 through the first quarter of 2005. For the seventh consecutive quarter, the Pacific states led the nation in annual house-price appreciation, growing at 19.2 percent. Once again the South Atlantic states were second, with a growth rate of 15.3 percent, followed again by the Middle Atlantic states, which grew at a slightly slower pace of 14.7 percent for the year. The New England states came next with growth at an annual appreciation rate of 13.4 percent.
The Mountain states followed New England, posting an annual home-price growth rate of 11.9 percent. After the Mountain states, the West North Central states saw an increase of 7.1 percent, while the East North Central states showed an increase of 6.7 percent. Finally, the East South Central states had gains of 5.7 percent and the West South Central states had the slowest annual appreciation of 3.7 percent annually
"The first quarter of 2005 was the 39th consecutive quarter in which all nine regions of the United States had positive annual home price growth," noted Amy Crews Cutts, Freddie Mac deputy chief economist. "We are starting to see the impact of the manufacturing job losses on house prices in smaller metro areas covered by the CMHPI. The question remains as to how long the streak of positive growth in all regions will last if interest rates rise sharply and economic growth stagnates or the public loses some of its enthusiasm for real estate.
"The fastest growing areas are attracting population due to strong jobs growth and secular migration to the sun belt. For instance, Nevada added 72,600 nonfarm, payroll jobs over the twelve months ended in the first quarter 2005, a 6.5 percent increase in employment and the largest percentage gain of any state. Nevada also enjoyed the strongest annual house price appreciation in the nation at 29.7 percent. In contrast, Michigan lost 17,800 payroll jobs, a 0.4 percent employment decline, and house prices grew statewide at 4.9 percent over the year."
The Conventional Mortgage Home Price Index shows the following regional performances:
Jointly developed by Freddie Mac and Fannie Mae and first published by Freddie Mac starting in 1994, the Conventional Mortgage Home Price Index features indexes for the nine Census divisions as well as a national index. The national index is the average of the nine divisional indexes weighted by the distribution of one-unit detached, single-family structures in each Census division.Pacific Division (AK, CA, HI, OR, WA): increased 4.0 percent (16.8 percent, annualized) in the first quarter of 2005. Over the last 12 months, home values increased 19.2 percent, and during the last five years, home values have increased 81.5 percent.
South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): increased 3.0 percent (12.7 percent, annualized) in the first quarter of 2005. Over the last 12 months, home values increased 15.3 percent, and during the last five years, home values increased 57.8 percent
Middle Atlantic Division (NJ, NY, PA): increased 2.1 percent (8.7 percent, annualized) in the first quarter of 2005. Over the last 12 months, home values increased 14.7 percent, and during the last five years, home values increased 69.5 percent.
New England Division (CT, MA, ME, NH, RI, VT): increased 2.3 percent (9.4 percent, annualized) in the first quarter of 2005. Over the last 12 months, home values increased 13.4 percent, and during the last five years, home values increased 74.0 percent.
Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): increased 3.0 percent (12.7 percent, annualized) in the first quarter of 2005. In the last 12 months, home values increased 11.9 percent, and during the last five years, home values increased 38.8 percent.
West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 1.4 percent (5.6 percent, annualized) in the first quarter of 2005. Over the last 12 months, home values increased 7.1 percent, and during the last five years, home values increased 38.8 percent.
East North Central Division (IL, IN, MI, OH, WI): increased 1.6 percent (6.4 percent, annualized) in the first quarter of 2005. Over the last 12 months, home values increased 6.7 percent, and during the last five years, home values increased 30.6 percent.
East South Central Division (AL, KY, MS, TN): increased 1.0 percent (3.9 percent, annualized) in the first quarter of 2005. Over the last 12 months, home values increased 5.7 percent, and during the last five years, home values increased 25.5 percent.
West South Central Division (AR, LA, OK, TX): increased 0.1 percent (0.6 percent, annualized) in the first quarter of 2005. Over the last 12 months, home values increased 3.7 percent, and during the last five years, home values increased 24.8 percent.
Unlike other home price indexes based on mean or median values of homes sold during a given period, the Conventional Mortgage Home Price Index is constructed, using regression techniques, from observations of actual sales prices or appraised values of the same homes over time. The street addresses of properties that serve as collateral for mortgages funded by the two secondary mortgage market firms are first processed using software certified by the United States Postal Service to create a uniform address format and are then matched to identify consecutive transactions on the same property. There are currently 28.7 million records in the repeat-transactions database used to construct the Conventional Mortgage Home Price Index – this database includes transactions on one–unit detached and single-family townhome properties serving as collateral on loans originated through the first quarter of 2005 and purchased by Freddie Mac and Fannie Mae by April 30, 2005.
Freddie Mac publishes the Conventional Mortgage Home Price Index each quarter. 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 163 metropolitan statistical areas (MSAs) can be found on Freddie Mac’s web site, www.freddiemac.com/finance/cmhpi/
All Entries Are Percent Changes |
New England | Middle Atlantic | South Atlantic | East South Central | West South Central | West North Central | East North Central | Mountain | Pacific | The United States |
| Quarterly Change Q4 2004-Q1 2005 |
2.3 |
2.1 |
3.0 |
1.0 |
0.1 |
1.4 |
1.6 |
3.0 |
4.0 |
2.3 |
| Annualized Quarterly Change Q4 2004-Q1 2005 |
9.4 |
8.7 |
12.7 |
3.9 |
0.6 |
5.6 |
6.4 |
12.7 |
16.8 |
9.6 |
| Annual Change Q1 2004-Q1 2005 |
13.4 |
14.7 |
15.3 |
5.7 |
3.7 |
7.1 |
6.7 |
11.9 |
19.2 |
11.8 |
| 5-Year Change Q1 2000-Q1 2005 |
74.0 |
69.5 |
57.8 |
25.5 |
24.8 |
38.8 |
30.6 |
38.8 |
81.5 |
49.6 |
| Annualized 5-Year Change Q1 2000-Q1 2005 |
11.7 |
11.1 |
9.5 |
4.6 |
4.5 |
6.8 |
5.5 |
6.8 |
12.7 |
8.4 |
Source: Freddie Mac
Contact ALTA at 202-296-3671 or [email protected].