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Home Price Growth Last Year was Slowest Since 1999

March 7, 2007

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Home prices rose just 6.1 percent in 2006, according to the Freddie Mac Conventional Mortgage Home Price Index (CMHPI), the slowest calendar-year growth rate since 1999 when prices increased 5.4 percent.

"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.

"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," he said.

"Home values grew 6.1 percent during 2006, down from the year-over-year growth rate of 8.0 percent that we saw in the third quarter, and less than half the rate of appreciation of 13.3 percent that we enjoyed in 2005," said Nothaft.

"The CMHPI tends to lag other indicators of home-value change because some of the information is based on appraisal data, which can be based on home sales prices a few months earlier. Because other indicators continue to show value weakness in some markets, it is likely that appreciation measured by the CMHPI will moderate further this year. We project that appreciation in 2007 will be about one-half of last year's rate, or near 3 percent."

The Mountain states led the growth in home prices with an annualized rate of 8.0 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 6.0 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 addition, Michigan is the only state showing year-over-year declines in home values. Among the eleven largest metropolitan areas, both Boston and Detroit had an annual decline in values.

"We continue to see weakness in the Great Lakes region impacted by manufacturing job losses. Thirty-one metropolitan areas registered year-over-year declines in average home values, with 18 of these markets in Michigan, Indiana and Ohio. The largest decline was recorded in Kokomo, Indiana, with an average 5.0 percent loss in values between the fourth quarter of 2005 and the fourth quarter of 2006. Midland, Texas, showed the largest gain over the past year, with values rising 27.9 percent."

The Conventional Mortgage Home Price Index shows the following regional performances:

• Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): increased 1.9 percent (8.0 percent, annualized) in the fourth quarter of 2006. In the last 12 months, home values increased 8.5 percent; during the last five years, home values increased 57.0 percent.

• South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): increased 1.9 percent (7.7 percent, annualized) in the fourth quarter of 2006. Over the last 12 months, home values increased 7.3 percent, and during the last five years, home values increased 69.5 percent.

• West South Central Division (AR, LA, OK, TX): increased 1.5 percent (6.3 percent, annualized) in the fourth quarter of 2006. Over the last 12 months, home values increased 7.7 percent, and during the last five years, home values increased 30.3 percent. East South Central Division (AL, KY, MS, TN): increased 1.5 percent (6.0 percent, annualized) in the fourth quarter of 2006. Over the last 12 months, home values increased 7.4 percent, and during the last five years, home values increased 31.4 percent.

• Middle Atlantic Division (NJ, NY, PA): increased 1.1 percent (4.7 percent, annualized) in the fourth quarter of 2006. Over the last 12 months, home values increased 6.5 percent, and during the last five years, home values increased 72.4 percent.

• West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 1.0 percent (4.2 percent, annualized) in the fourth quarter of 2006. Over the last 12 months, home values increased 3.5 percent; over the last five years, home values increased 34.4 percent.

• East North Central Division (IL, IN, MI, OH, WI): increased 1.0 percent (3.9 percent, annualized) in the fourth quarter of 2006. Over the last 12 months, home values increased 2.9 percent, and during the last five years, home values increased 27.7 percent.

• New England Division (CT, MA, ME, NH, RI, VT): increased 0.6 percent (2.4 percent, annualized) in the fourth quarter of 2006. Over the last 12 months, home values increased 2.3 percent, and during the last five years, home values increased 57.2 percent.

• Pacific Division (AK, CA, HI, OR, WA): increased 0.5 percent (2.2 percent, annualized) in the fourth quarter of 2006. Over the last 12 months, home values increased 7.4 percent, and during the last five years, home values have increased 94.6 percent.

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