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Growth In Housing Values Slowed Dramatically In Last Quarter Of 2001, Finds Freddie Mac Quarterly Report

March 1, 2002

South Atlantic States Take Over Lead In Home Price Appreciation In Fourth Quarter 2001

McLean, VA - Growth in home values increased by an annualized rate of 1.3 percent nationwide in the fourth quarter of 2001, down from an upwardly revised annualized rate of 7.7 percent for the third quarter of 2001, according to the Conventional Mortgage Home Price Index released today by Freddie Mac. The index showed that annual house-price appreciation also increased 7.1 percent from the fourth quarter of 2000 through the fourth quarter of 2001.

Home values in the South Atlantic states showed the most gains in value, growing at a modest, but comfortable, annualized rate of 3.4 percent during the fourth quarter. New England touted similarly moderate gains, registering an annualized growth rate of 2.9 percent. The Middle Atlantic states ranked a close third with annualized gains of 2.8 percent. The East South Central and Mountain states followed with more modest growth rates of 1.8 percent each, while the East North Central states posted a gain of only 0.5 percent.

Home values in the Pacific States showed a small, annualized increase of only 0.1 percent during the period, trailed by the West South Central States, which recorded no growth in home values, and the West North Central States, which declined by an annualized rate of negative 0.2 percent during the fourth quarter of 2001.

"As was expected, the rate of growth in housing values slowed in the fourth quarter, primarily because of the recession and the shock of the September 11 terrorist attack," said Frank Nothaft, Freddie Mac chief economist. "Understandably, housing in areas of the country that were heavily dependent on manufacturing and high-tech employment were hit the hardest during the latest economic downturn and that is reflected in lower growth rates in the value of housing.

"On a positive note, home values across the nation have risen 7.1 percent since the fourth quarter of 2001 and were up in all nine regions. Over a five-year period, housing values nationally increased 37.1 percent since the fourth quarter of 1996.

"Last year, the record-setting housing industry kept the economy from sliding into a long, deep recession. Rather, we experienced a shorter, milder one from which we are now beginning to recover. And as we emerge from the troubled economic times of the past, we foresee yet another good year ahead for housing, with continuing low mortgage rates, but with a smaller level of growth in housing values. We expect home values nationally to appreciate about 3 percent over 2002."

Jointly developed by Freddie Mac and Fannie Mae, the Conventional Mortgage Home Price Index features indexes for the nine Census divisions as well as a national index. The national index is the average of the nine divisional indexes weighted by the distribution of detached, one-unit, single-family structures in each Census division.

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

  • South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): increased 0.8 percent (3.4 percent, annualized) in the fourth quarter of 2001. Over the last 12 months, home values increased 8.4 percent, and during the last five years, home values increased 36.2 percent.

  • New England Division (CT, MA, ME, NH, RI, VT): increased 0.7 percent (2.9 percent, annualized) in the fourth quarter of 2001. Over the last 12 months, home values increased 10.3 percent, and during the last five years, home values increased 57.3 percent

  • New England Division (CT, MA, ME, NH, RI, VT): increased 0.7 percent (2.9 percent, annualized) in the fourth quarter of 2001. Over the last 12 months, home values increased 10.3 percent, and during the last five years, home values increased 57.3 percent.

  • Middle Atlantic Division (NJ, NY, PA): increased 0.7 percent (2.8 percent, annualized) in the fourth quarter of 2001. Over the last 12 months, home values increased 9.2 percent, and during the last five years, home values increased 39.8 percent.

  • East South Central Division (AL, KY, MS, TN): increased 0.5 percent (1.8 percent, annualized) in the fourth quarter of 2001. Over the last 12 months, home values increased 5.3 percent, and during the last five years, home values increased 26.9 percent.

  • Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): increased 0.5 percent (1.8 percent, annualized) in the fourth quarter of 2001. In the last 12 months, home values increased 6.4 percent, and during the last five years, home values increased 33.3 percent.

  • East North Central Division (IL, IN, MI, OH, WI): increased 0.1 percent (0.5 percent, annualized) in the fourth quarter of 2001. Over the last 12 months, home values increased 4.9 percent, and during the last five years, home values increased 32.5 percent.

  • Pacific Division (AK, CA, HI, OR, WA): increased 0.0 percent (0.1 percent, annualized) in the fourth quarter of 2001. Over the last 12 months, home values increased 8.5 percent, and during the last five years, home values have increased 48.5 percent.

  • West South Central Division (AR, LA, OK, TX): increased 0.0 percent (0.0 percent, annualized) in the fourth quarter of 2001. Over the last 12 months, home values increased 5.1 percent, and during the last five years, home values increased 29.0 percent.

  • West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 0.0 percent (-0.2 percent, annualized) in the fourth quarter of 2001. Over the last 12 months, home values increased 6.8 percent, and during the last five years, home values increased 38.8 percent.

Unlike other home price indexes based on mean or median values of homes sold during a given period, the Conventional Mortgage Home Price Index is constructed, using regression techniques, from observations of actual sales prices or appraised values of the same homes over time. The street addresses of properties that serve as collateral for mortgages funded by the two secondary mortgage market firms are first processed using software certified by the United States Postal Service to create a uniform address format and are then matched to identify consecutive transactions on the same property. There are currently more than 9 million records in the repeat-transactions database used to construct the nine division indexes.

Freddie Mac releases theConventional Mortgage Home Price Index each quarter. Index values and growth rates for the nation as a whole as well as for the nine Census divisions, the 50 states and the District of Columbia, and 163 metropolitan statistical areas (MSAs) can be found within that area.

Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to create a continuous flow of funds to mortgage lenders. By supplying lenders with the money to make mortgages and packaging the mortgages into marketable securities, Freddie Mac sustains a stable mortgage credit system and reduces the mortgage rates paid by homebuyers. Over the years, Freddie Mac has opened doors for one in six homebuyers in America.

Conventional Mortgage Home Price Index Q4 2001 Release

 

New England

Middle Atlantic

South Atlantic

East South Central

West South Central

West North Central

East North Central

Mountain

Pacific

The United States

All Entries Are Percent ChangesQuarterly Change

Q3 2001-Q4 2001

0.71

0.69

0.84

0.46

0.01

-0.05

0.12

0.46

0.03

0.33

Annualized Quarterly Change

Q3 2001-Q4 2001

2.87

2.80

3.39

1.84

0.03

-0.20

0.47

1.84

0.11

1.33

Annual Change

Q4 2000-Q4 2001

10.35

9.15

8.43

5.30

5.14

6.79

4.92

6.39

8.54

7.08

5-Year Change

Q4 1996-Q4 2001

57.30

39.81

36.18

26.91

28.99

38.76

32.46

33.27

48.51

37.15

Annualized 5-Year Change

Q4 1996-Q4 2001

9.48

6.93

6.37

4.88

5.22

6.77

5.78

5.91

8.23

6.52

 

Source: Freddie Mac



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