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Housing Values Rose At Vigorous Pace In First Quarter Of 2002, Finds Freddie Mac Quarterly Report

June 5, 2002

Middle Atlantic States Are The Front Runners

McLean, VA- Freddie Mac announced today that its quarterly Conventional Mortgage Home Price Index (CMHPI) found growth in home values increased by an annualized rate of 5.7 percent nationwide in the first quarter of 2002. This rate is more than double the revised annualized rate of 2.7 percent for the fourth quarter of 2001, demonstrating the resiliency of housing values in weathering the economic uncertainty of recent times. The index also showed that annual house-price appreciation was a robust 6.3 percent from the first quarter of 2001 through the first quarter of 2002.

Home values in the Middle Atlantic states showed the most gains in value, growing at a robust annualized rate of 8.3 percent during the first quarter. The Pacific states came in next, registering an also remarkable growth rate of 7.5 percent. New England ranked third with an impressive annualized gain of 6.9 percent. The West North Central followed closely with an annualized gain of 6.7 percent. The South Atlantic posted a strong growth rate of 6.2 percent, while the East North Central registered a gain of 5.4 percent.

While still showing increases in home values that were larger than the overall inflation rate, the East South Central states showed a much smaller annualized increase in rate of growth of 3.6 percent during the period. Following were the Mountain states, which recorded a rate of growth in home values of 2.3 percent. The West South Central states trailed the list with the annualized growth rate of only 1.6 percent during the first quarter of 2002.

"We expect growth in home prices to slow somewhat over the rest of the year, with the average single-family home appreciating between 4 percent and 5 percent ," said Frank Nothaft, Freddie Mac chief economist. "This rate of growth is consistent with the strength in consumer spending and other housing statistics for the quarter.

"Going forward, housing will continue to help anchor the economy as it slowly climbs out of last year's shallow recession. Nationally we see no evidence of an asset-price bubble in home values, although some states and metro areas hit hard by the weakness in technology, airline and manufacturing sectors are seeing declines in values."

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:

  • Middle Atlantic Division (NJ, NY, PA): increased 2.0 percent (8.3 percent, annualized) in the first quarter of 2002. Over the last 12 months, home values increased 8.9 percent, and during the last five years, home values increased 42.0 percent.
  • Pacific Division (AK, CA, HI, OR, WA): increased 1.8 percent (7.5 percent, annualized) in the first quarter of 2002. Over the last 12 months, home values increased 6.9 percent, and during the last five years, home values have increased 50.2 percent.
  • New England Division (CT, MA, ME, NH, RI, VT): increased 1.7 percent (6.9 percent, annualized) in the first quarter of 2002. Over the last 12 months, home values increased 9.8 percent, and during the last five years, home values increased 58.7 percent
  • West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 1.6 percent (6.7 percent, annualized) in the first quarter of 2002. Over the last 12 months, home values increased 6.7 percent, and during the last five years, home values increased 39.5 percent.
  • South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): increased 1.5 percent (6.2 percent, annualized) in the first quarter of 2002. Over the last 12 months, home values increased 7.2 percent, and during the last five years, home values increased 36.6 percent.
  • East North Central Division (IL, IN, MI, OH, WI): increased 1.3 percent (5.4 percent, annualized) in the first quarter of 2002. Over the last 12 months, home values increased 5.2 percent, and during the last five years, home values increased 32.7 percent.
  • East South Central Division (AL, KY, MS, TN): increased 0.9 percent (3.6 percent, annualized) in the first quarter of 2002. Over the last 12 months, home values increased 3.8 percent, and during the last five years, home values increased 26.5 percent.
  • Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): increased 0.6 percent (2.3 percent, annualized) in the first quarter of 2002. In the last 12 months, home values increased 4.9 percent, and during the last five years, home values increased 32.8 percent.
  • West South Central Division (AR, LA, OK, TX): increased 0.4 percent (1.6 percent, annualized) in the first quarter of 2002. Over the last 12 months, home values increased 3.4 percent, and during the last five years, home values increased 28.8 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 the Conventional 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 on Freddie Mac's web site, www.freddiemac.com/finance/cmhpi/.

Source: Freddie Mac



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