Home-price growth has slowed in Freddie Mac’s quarterly national Conventional Home Price Index released today, adding to evidence the nation’s housing market is cooling.

Freddie Mac’s home-price-growth index rose 12.5 percent in the fourth quarter on an annualized basis, down from a revised third-quarter-2005 annualized rate of 13.4 percent and a second-quarter-2005 growth rate of 15.4 percent.

“Mortgage rates rose sharply in the fourth quarter and we are starting to see marked slowing in the rate of home-price appreciation,” said Frank Nothaft, Freddie Mac vice president and chief economist. The monthly average for fixed-rate mortgages and 5/1 adjustable-rate mortgages rose about one-half of a percentage point between September and December, he said. Rates on one-year ARMs also increased.

Freddie Mac expects mortgage rates to rise gradually throughout this year, causing housing activity to ease, Nothaft added.

“We’ve now seen two consecutive quarters of moderation in home-value growth. We expect the trend of slowing growth in home values to continue, with national average home-value appreciation about one-half of last year’s rise. This would still be above the long-term average growth rate and reflects a still vibrant but normalizing housing market,” he said.

Nationally, home values increased 13 percent from the fourth quarter of 2004 through the fourth quarter of 2005, up from the 12.1 percent annual growth seen over the four quarters ended in December 2004. 

The Mountain states showed the strongest home-value appreciation in the U.S., with quarterly appreciation of 19.4 percent at an annualized rate during the fourth quarter, followed by the Pacific region with gains of 18.2 percent. The Pacific region was followed by the South Atlantic states, which posted a gain of 16.8 percent.

The Middle Atlantic states experienced average price growth of 13.7 percent with New England after that with 8.9 percent growth.

The West South Central division saw an increase of 8.4 percent and the East South Central states had gains of 7.7 percent. The West North Central states had the second slowest annual appreciation of 6 percent annually. The East North Central states came in last with a growth rate of 5.6 percent.

“The CMHPI shows home-value appreciation heating up in the Mountain states, challenging the reign of the Pacific region as the leader in price growth – population growth in Arizona and Nevada has been particularly fast and has created very strong housing demand,” said Amy Crews Cutts, Freddie Mac deputy chief economist.

By state, the most robust housing market was in Arizona, which recorded annual home-value gains of 36.2 percent year-over-year, while the slowest appreciating market was in Michigan, where home values were up 3.7 percent over the year. 

“The Phoenix metro area recorded the fastest growth in home values during 2005, with a 41.2 percent rise,” Crews Cutts said. “This area has had fast home-price growth for a while due to strong jobs growth – out of the nearly 2 million nonfarm payroll jobs added to the U.S. economy in 2005, 82,000 of them were created in Phoenix, about equal to the total number added in the five states that make up the East North Central Division where the recession in the manufacturing sector has hit hard.”

In Las Vegas, although job growth has remained strong, home-price growth has moderated greatly to 15.5 percent in 2005 from the more than 40 percent growth in values in 2004, she said.

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Send tips or a Letter to the Editor to jessica@inman.com or call (510) 658-9252, ext. 133.

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