Largest U.S. House Price Increases In More Than 25 Years

September 1, 2005

OFHEO House Price Index Shows Annual Rise of 13.4 Percent

WASHINGTON, D.C. – Average U.S. home prices increased 13.43 percent from the second quarter of 2004 through the second quarter of 2005. Appreciation for the most recent quarter was 3.20 percent, or an annualized rate of 12.8 percent. The new data represent the largest four-quarter increase since the second quarter of 1979. 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.

“There is no evidence here of prices topping out,” said OFHEO Chief Economist Patrick Lawler. “On the contrary, house price inflation continues to accelerate, as some areas that have experienced relatively slow appreciation are picking up steam.”

House prices grew considerably faster over the past year than did prices of non-housing goods and services reflected in the Consumer Price Index. House prices rose 13.4 percent, while prices of other goods and services rose only 3.1 percent. The Pacific C ensus Division continues to exhibit the fastest appreciation while the slowest growing area continues to be the West South Central division, which includes Texas, Oklahoma, Arkansas, and Louisiana. Arizona and Nevada continue to exhibit striking appreciation rates.

Significant findings in the HPI:

  1. Nevada continues to have the highest appreciation of all states; house prices increased 28.1 percent over the past year and 5.5 percent for the quarter. However, for the first time since the fourth quarter of 2003, Las Vegas is not on
    the OFHEO list of the 20 fastest growing MSAs.
  2. The second greatest annual price growth was in Arizona. Over the second quarter alone, Arizona house prices grew 9.7 percent – far surpassing every other state. Arizona’s annual growth rate rose from 20.4 percent in the first quarter of 2005 to 27.8 percent in the second quarter of this year.
  3. Thirty of the 265 ranked Metropolitan Statistical Areas (MSAs) had four-quarter appreciation exceeding 25 percent.
  4. For the first time, Naples-Marco Island, Florida topped the list of ranked MSAs with the highest appreciation. Bakersfield, California was second.
  5. Florida, California, Nevada, and Arizona are no longer the only states represented in the top 20 MSA list. MSAs in Idaho and Utah have now entered the list.
  6. Twenty-five states (including the District of Columbia) exhibited double-digit annual price growth and eight states had price increases exceeding 20 percent.
  7. Four-quarter appreciation rates in Maryland and Virginia (along with Arizona and Florida) were at their highest levels over the 30-year history of the OFHEO HPI.


“The continued price increases are a result of many factors including low mortgage interest rates and the apparent impact of speculative investing,” said Lawler. “The robust appreciation rates are striking both in terms of their magnitude and in their geographic scope. However, they are likely unsustainable given the underlying inflation rate, income growth and other factors,” Lawler said.

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 second quarter of 2004 and the second quarter of 2005. That index increased 10.99 percent, compared with 13.43 percent for the HPI.

Source: OFHEO


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