The rate of home-price appreciation continued to slow in the third quarter, confirming a “national deceleration in house prices,” the director of the Office of Federal Housing Enterprise Oversight said today.
OFHEO’s latest House Price Index showed the rate of appreciation falling in seven of nine U.S. Census divisions, and prices on the decline in five states: New York, Rhode Island, Michigan, New Hampshire and Massachusetts. More than half the cities in California experienced price declines in the third quarter.
Nationwide home-price appreciation in the third quarter was 0.86 percent, or an annualized rate of 3.45 percent — the lowest since the second quarter of 1998. That compares to a 5.1 percent annual appreciation rate in the second quarter of 2006. Nationwide, home prices were up 7.7 percent in the last 12 months.
“Our newest data confirm last quarter’s data that the housing market is in a decidedly different stage,” said OFHEO Director James B. Lockhart in a statement. “With U.S. house prices growing less than 1 percent during the third quarter, it provides more evidence that the long-forecasted national deceleration in house prices is occurring.”
Given that housing prices were driven up 56.8 percent in the last five years, “the slowdown is not unexpected,” Lockhart said. At the height of the boom — the third quarter of 2004 — housing prices appreciated at the annualized rate of 17.7 percent.
OFHEO Chief Economist Patrick Lawler said an “orderly” transition to “normal or weak markets” is underway, and that recent reductions in interest rates “lessen the likelihood that precipitous changes will occur.”
Although the rate of appreciation remains high in some areas, they are the exception rather than the rule, OFHEO said. In some areas hit hard by Hurricane Katrina, for example, prices are still on the rise. Areas seeing record price increases in the last 12 months included Baton Rouge, La. (up 14.1 percent), Gulfport-Biloxi, Miss. (23.3 percent), and Mobile, Ala. (17.5 percent).
The states experiencing the greatest appreciation rate in the last 12 months were Idaho (17.5 percent), Utah (17.4 percent), Oregon (16.9 percent), Arizona (16.4 percent) and Washington (16.3 percent).
Home prices in Michigan actually declined by .6 percent over the same period — the first time in six years a state has experienced a year-over-year decline in prices, OFHEO reported. The states with the slowest rate of price appreciation over the last 12 months were Ohio (1 percent), Massachusetts (1.1 percent), Indiana (2.3 percent), Nebraska (3.2 percent) and Minnesota (3.4 percent).
The metropolitan statistical areas (MSAs) with the fastest rates of appreciation in the last 12 months were Bend, Ore. (30.4 percent); Boise City-Nampa, Idaho (26.5 percent); Gulfport-Biloxi, Miss. (23.3 percent); Wenatchee, Wash. (22 percent); and Myrtle Beach-Conway, S.C. (21.7 percent).
A total of 18 MSAs have seen declines in home prices over the last 12 months. The MSAs showing the steepest declines were Anderson, Ind. (down 6 percent); Ann Arbor, Mich. (down 3 percent); Springfield, Ohio (down 2.1 percent); Holland-Grand Haven, Mich. (down 2 percent); and Greeley, Colo. (down 2 percent).
In most states, prices are appreciating more rapidly in rural markets than in urban areas. In Wyoming, Maine, Nevada and Colorado, the spread in price appreciation between properties in rural and urban areas in the last two quarters was 3 percent or more. Urban price growth exceeded rural appreciation in only nine states: Hawaii, New Mexico, Oregon, Delaware, Virginia, South Carolina, Iowa, West Virginia and Connecticut.