Freddie Mac today announced that its quarterly Conventional Mortgage Home Price Index (CMHPI) found growth in home values increased by an annualized rate of 8.5 percent in the first quarter of 2004, which is down considerably from the fourth quarter but higher than the year-ago period.

The first-quarter rate is up from the annualized rate of the first quarter of 2003 when the growth rate was 5.1 percent.

“The first quarter of the year was great for the housing market,” said Amy Crews Cutts, Freddie Mac’s deputy chief economist. “Low and declining mortgage rates over the quarter that bottomed out in March at 5.4 percent for 30-year, fixed-rate mortgages, pushed homes sales to a healthy 7.37 million units (annualized rate), and this strong housing demand helped keep house-price appreciation well ahead of overall inflation.”

The quarterly growth rates show a significant decrease from the previous quarter’s values. Nationally, home values increased by an annualized rate of 5.6 percent in the first quarter of 2004. The fourth quarter 2003 annualized growth rate was revised upward to 17.9 percent.

Once again, the Pacific states continued to lead the nation in annual house-price appreciation, growing at an astonishing annual rate of 14.3 percent for the year. The Middle Atlantic states were, again, second in growth with an annual appreciation rate of 10.9 percent. The New England states trailed the Middle Atlantic slightly with an annual home-price growth rate of 10.7 percent. After New England came the South Atlantic states, registering a gain of 9.8 percent, followed by the West North Central states with an increase of 6.6 percent.

The Mountain states showed a rise in home values of 5.9 percent, while the East North Central states experienced a growth rate of 5.4 percent in home values. Finally, the East South Central states posted an expansion of 4.3 percent and the West South Central states ended the list for the fourth consecutive quarter with an annual growth rate of 3.8 percent for the first quarter of 2004.

“Strong jobs growth like we saw in March and April should keep housing demand robust even as mortgage interest rates rise,” Cutts said. “Near record new-home construction activity won’t quite keep up with housing demand, so annual national home-price appreciation should be quite vigorous, between 6 to 6.5 percent for 2004.”

Jointly developed by Freddie Mac and Fannie Mae, 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 detached, one-unit, single-family structures in each Census division.

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