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National Home Values Rise Slightly In Second Quarter - Coastal and East North Central Regions See Declines

September 6, 2007

McLean, VA – Freddie Mac (NYSE: FRE) announced that its Conventional Mortgage Home Price Index (CMHPI) Classic Series indicates that home values rose 0.4 percent in the second quarter 2007 on an annualized basis, down from a revised first quarter 2007 annualized rate of 2.0 percent, and the slowest quarterly growth rate in more than 12 years. Over the twelve months ending in June, home values appreciated 3.3 percent on average, down from the 10.2 percent growth over the same period a year earlier.

The CMHPI Classic Series includes data from both home purchase transactions and mortgage refinancings based on appraisals. Freddie Mac also produces a CMHPI Purchase-Only Transactions Series, which indicates that homes sales prices rose by 5.8 percent nationally in the second quarter on an annualized basis and 2.5 percent year-over-year, the slowest annual rate of growth in 14 years. Over the four quarters ended in June 2006, home sales prices rose an average of 8.4 percent in the CMHPI Purchase-Only Series.

Based on the CMHPI-Classic Series, the West South Central states led growth in home values with an annualized appreciation rate of 5.1 percent during the second quarter, followed by the East South Central states, which showed a smaller gain of 4.9 percent. The Mountain states came next, with a growth rate of 1.8 percent. The West North Central states experienced average price growth of 1.4 percent. Homes in the South Atlantic region saw a modest decline in average values of 0.2 percent, followed by a 0.4 percent decline in the Middle Atlantic region and a drop of 0.5 percent in the East North Central states. States in the Pacific region saw home values slip 1.0 percent, and New England saw the largest decline in average values at 2.2 percent.

"Home sales were down significantly in the second quarter, running at 6.03 million units on an annualized basis," said Frank Nothaft, Freddie Mac vice president and chief economist. "In the first quarter, total single-family house sales were running at 6.49 million units and a year ago ran at 6.89 million units. Normally, with falling sales volume, we would expect to see the growth rate in home prices stall. The difference in trends in our two home price indices may indicate that the homes that are selling are in better condition than those that linger on the market – that is, they have made real improvements in the homes since they were last observed in our database. Another possibility may be that appraisers are getting more conservative in their evaluations."

"The CMHPI Classic Series recorded five regions with falling average home values in the second quarter," noted Amy Crews Cutts, Freddie Mac deputy chief economist. "The East North Central states are still plagued by manufacturing employment losses, but the South Atlantic, Middle Atlantic, New England and Pacific regions are all feeling the hit of the housing slump with otherwise fairly healthy economies. These are also the states with the highest housing costs and that had the largest gains in home values over the past five years.

"While no one who has ever bought a home wants to see the value fall, thus far we are not seeing declines as deep as we did during the defense industry slump in the early 1990s or the energy market crash in the 1980s. For example, home values in California fell by 2.4 percent over the four quarters ended in December 1992 as layoffs really started to have an impact – more than 194,000 jobs were eliminated in California in that year – and at the worst point of the housing market decline in the state, home values were down by a cumulative 12.6 percent between the third quarter 1990 and the first quarter of 1995. But over the past twelve months, while California home values have gone down by 1.4 percent, non-farm payroll employment is up by 207,000 jobs, and families that bought their home in June 2005 have seen an average gain of more than 13 percent over two years."

States in the West that are benefiting from the rise in energy prices are seeing the largest gains in home values today. 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 is down only 1.4 percent year-over-year. Four other states are down year-over-year, with Massachusetts and Nevada recording the biggest decrease at 1.5 percent, California also seeing a 1.4 percent drop, and Rhode Island seeing a loss of 1.2 percent.

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

  • West South Central Division (AR, LA, OK, TX): increased 1.3 percent (5.1 percent, annualized) in the second quarter of 2007. Over the last 12 months, home values increased 6.2 percent, and during the last five years, home values increased 31.4 percent.
  • East South Central Division (AL, KY, MS, TN): increased 1.2 percent (4.9 percent, annualized) in the second quarter of 2007. Over the last 12 months, home values increased 6.1 percent, and during the last five years, home values increased 32.8 percent.
  • Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): increased 0.4 percent (1.8 percent, annualized) in the second quarter of 2007. In the last 12 months, home values increased 5.7 percent; during the last five years, home values increased 56.5 percent.
  • West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 0.4 percent (1.4 percent, annualized) in the second quarter of 2007. Over the last 12 months, home values increased 3.3 percent; over the last five years, home values increased 31.0 percent.
  • South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): decreased 0.04 percent (-0.2 percent, annualized) in the second quarter of 2007. Over the last 12 months, home values increased 3.7 percent, and during the last five years, home values increased 64.6 percent.
  • Middle Atlantic Division (NJ, NY, PA): decreased 0.1 percent (-0.4 percent, annualized) in the second quarter of 2007. Over the last 12 months, home values increased 3.1 percent, and during the last five years, home values increased 64.1 percent.
  • East North Central Division (IL, IN, MI, OH, WI): decreased 0.1 percent (-0.5 percent, annualized) in the second quarter of 2007. Over the last 12 months, home values increased 2.1 percent, and during the last five years, home values increased 24.3 percent.
  • Pacific Division (AK, CA, HI, OR, WA): decreased 0.2 percent (-1.0 percent, annualized) in the second quarter of 2007. Over the last 12 months, home values increased 2.1 percent, and during the last five years, home values have increased 85.0 percent.
  • New England Division (CT, MA, ME, NH, RI, VT): decreased 0.6 percent (-2.2 percent, annualized) in the second quarter of 2007. Over the last 12 months, home values increased 0.3 percent, and during the last five years, home values increased 46.7 percent.

Source: Freddie Mac



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