Home-price appreciation slowed to an annual rate of 0.4 percent during the second quarter, the slowest quarterly growth rate in more than 12 years, Freddie Mac said in releasing its latest home-price index.
Freddie Mac’s Conventional Mortgage Home Price Index “Classic Series” — which excludes homes with nonconforming mortgages of more than $417,000 — draws on data from sales of homes and also appraisals undertaken for mortgage refinancings.
The Classic Series index showed home values appreciated 3.3 percent on average for the 12 months ending in June, compared with 10.2 percent growth during the same period a year earlier.
When refinancings were excluded and only sales of homes with conventional mortgages were analyzed, Freddie Mac found home prices appreciated at an annual rate of 5.8 percent during the second quarter. But year-over-year appreciation in the purchase-only index amounted to just 2.5 percent, down from 8.4 percent for the 12 months ending June 2006 and the index’s slowest annual rate of growth in 14 years.
The difference in second-quarter home-price appreciation in Freddie Mac’s two home-price indexes — 0.4 percent when refinancings and home sales are analyzed, and 5.8 percent in the purchase-only index — may indicate that homes that sell are in better condition that those that linger on the market, said Frank Nothaft, Freddie Mac vice president and chief economist.
In other words, it’s possible that the owners of properties that sell “have made real improvements in the homes since they were last observed in our database,” Nothaft said in a statement. Another possibility may be that appraisers are getting more conservative in their evaluations, Nothaft said.
During the second quarter, sales of single-family homes took place at an annualized rate of 6.03 million units, down from 6.49 million in the first quarter and 6.89 million units a year ago. Given the drop in sales volume, a slowdown in home-price appreciation is expected, Nothaft said.
The Classic Series index showed prices falling in five of nine regions of the country: New England (-2.2 percent annualized), Middle Atlantic (-0.4 percent), South Atlantic (-0.2 percent), East North Central (-0.5 percent) and Pacific (-1 percent). Prices appreciated at an annual rate of 4.9 percent in the East South Central region, 5.1 percent in the West South Central region, 1.4 percent in the West North Central region, and 1.8 percent in the Mountain region.
Western states are benefiting from rising energy prices and seeing the largest gains in home values, Freddie Mac reported.
Wyoming, Utah, North Dakota and Texas saw the largest gains in the second quarter, with Wyoming and Utah both seeing double-digit gains on an annualized basis.
Michigan had the largest drop in home values over the quarter at 6.1 percent annualized, but was down only 1.4 percent year-over-year. Home prices in four other states were down year-over-year: Massachusetts and Nevada (-1.5 percent), California (-1.4 percent) and Rhode Island (-1.2 percent.)
So far, declines in home values are not as steep as during the early 1990s defense industry slump or the energy market crash of the 1980s, said Freddie Mac Deputy Chief Economist Amy Crews Cutts.
Home values fell 12.6 percent in California between late 1990 and early 1995, Crews Cutts said, including a 2.4 percent decline in 1992 as the state lost more than 194,000 jobs. In the past 12 months, California nonfarm payroll employment grew by 207,000, Crews Cutts said.