Written by Nathan Thomas on September 7, 2004
Written by Nathan Thomas on September 7, 2004
The Office of Federal Housing Enterprise Oversight (OFHEO) released its quarterly House Price Index last week and said the 9.36 percent jump in property values from second quarter 2003 to second quarter 2004 was the largest one-year increase ever. For the quarter, prices were up 2.21 percent, an annualized rate of 8.83 percent.
The quarterly appreciation is more than 50 percent faster than the upward revised 1.45 percent increase in the first quarter of 2004. Over the past four quarters, house price rises far exceeded gains in the prices of non-housing goods and services incorporated into the Consumer Price Index. House prices rose 9.36 percent, while the price of other goods and services rose 3.03 percent, OFHEO said.
The states gaining the most in the quarter were Nevada, Hawaii, California and Rhode Island, while the smallest increases were seen in Utah, Texas and Indiana. Unlike in previous quarters, no state saw negative growth. Most northeastern seaboard states, from Virginia upward, experienced double-digit year-over-year appreciation, with only Massachusetts at 9.79 percent the exception.
The top 10 designated Metropolitan Statistical Areas (MSAs) for price appreciation were Las Vegas, 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 bottom five were Boulder-Longmont, CO, Provo-Orem, UT, Lafayette, IN, Elkhart-Goshen, IN and Austin-San Marcos, TX.
Rural areas - those outside MSAs - saw house prices grow less quickly than those in MSAs, but still faster than other consumer goods and services.
OFHEO's index is culled from data obtained from mortgages securitized by Fannie Mae and Freddie Mac, two of the entities OFHEO regulates.
"House prices may become increasingly vulnerable to potential sustained higher interest rates in the future, but that has not happened so far," said OFHEO Chief Economist Patrick Lawler. "Second quarter data do not fully reflect increases in borrowing costs in the spring of this year because of the timing lag between sales agreements or appraisals, and mortgage closings. Since then, mortgage rates have eased, however, and the prospects of substantial increases in the near future appear to have declined," Lawler said.