U.S. home prices appreciated 6.1 percent during 2006, which is the slowest calendar-year growth rate since 1999 when prices gained 5.4 percent, and is much lower than the 13.3 percent annual growth reported in 2005, Freddie Mac reported today.

According to Freddie Mac’s Conventional Mortgage Home Price Index (CMHPI), price appreciation in the fourth quarter rose 4.9 percent on an annualized basis, up from a revised third-quarter rate of 4.4 percent, but was impacted strongly by the slowdown in sales.

“Home sales fell 11 percent from the fourth quarter of 2005 to the final quarter of 2006, with especially large declines in markets that have experienced high housing costs and fast appreciation,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement. “Freddie Mac’s index shows that this drop in sales has also led to a substantial slowdown in home-value appreciation, and a drop in values in some markets where the economy is weak or housing costs have gotten very high.”

The Mountain states led the growth in home prices with an annualized rate of 8 percent during the fourth quarter, followed by the South Atlantic states, which showed a smaller gain of 7.7 percent. The West South Central states came next, with a growth rate of 6.3 percent. The East South Central states experienced average price growth of 6 percent, while the Middle Atlantic states posted an average appreciation rate of 4.7 percent. The West North Central states saw an increase of 4.2 percent and the East North Central region had a smaller gain of 3.9 percent. The New England states were next to last with an annualized appreciation of 2.4 percent. Finally, the Pacific states trailed the list with a growth rate of merely 2.2 percent.

“Seven states experienced price declines during the fourth quarter of 2006: California, Hawaii, Nebraska, Nevada, North Dakota, Rhode Island and West Virginia,” noted Amy Crews Cutts, Freddie Mac deputy chief economist, in a statement. “In addition, Michigan is the only state showing year-over-year declines in home values. Among the 11 largest metropolitan areas, both Boston and Detroit had an annual decline in values.

Crews Cutts cited weakness in the Great Lakes region due to losses in manufacturing jobs, and said 18 of the 31 U.S. metropolitan areas that reported year-over-year declines in average home values in the fourth quarter were located in Indiana, Michigan and Ohio. The largest decline occurred in Kokomo, Ind., where average home values dropped 5 percent from fourth-quarter 2005.

Nothaft said Freddie Mac projects home-price “appreciation in 2007 will be about one-half of last year’s rate, or near 3 percent.”

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