Home Prices Increase for Second Consecutive Quarter

December 10, 2009

Home prices increased for the second consecutive quarter as home values inched up .9 percent during the third quarter of 2009, according to data released by Freddie Mac. The increases of the past two quarters erased about two-fifths of the declines registered during the final quarter of 2008 and the first quarter of 2009, according to Freddie Mac’s Conventional Mortgage Home Price Index (CMHPI) Purchase-Only Series.

"The home-price gains of the past two quarters reflect improving existing home sales over that period. Sales volume was up 15 percent between the first and third quarters of this year," said Frank Nothaft, Freddie Mac vice president and chief economist. "The lowest average fixed-rate mortgage rates in a half-century, lower house prices, incentives to encourage first-time buyers, and loan modification efforts to stem foreclosures have worked together to support sales and reduce the inventory of unsold homes. Moreover, the price gains were broad-based with increases in seven of nine regions during the third quarter and all nine regions up from their first quarter values."

Prices are still down relative to their peaks in most markets. For example, as measured by the CMHPI, values in the New England, East North Central and Pacific divisions are at 2004 levels, on average, and the South Atlantic, West North Central, and Mountain states' home values are at 2005 levels. In contrast, average values in the West South Central area have tied their previous peak from the third quarter of 2008, while average home values in the Middle Atlantic and East South Central states have reached 2006 and 2007 levels, respectively.

The CMHPI Purchase-Only Series excludes all refinancings in its calculation. Freddie Mac also produces a CMHPI Classic Series that includes data from both home purchase transactions and mortgage refinancings, with the latter values based on appraisals. Generally, because appraisals are backwards looking through the use of recent comparable property transactions, the Classic Series will typically lag changes in the Purchase-Only series. The CMHPI Classic Series indicated that average U.S. home values fell 2.1 percent (-8.1 percent annualized) during the third quarter and depreciated 4.0 percent over the year ending with the third quarter of 2009.

The CMHPI Purchase-Only Series had the following regional house-price changes:

Pacific Division (AK, CA, HI, OR, WA): jumped up 3.9 percent (16.7 percent, annualized) in the third quarter of 2009. Over the last 12 months, home values decreased 6.9 percent, and during the last five years, home values have decreased 4.3 percent.

Middle Atlantic Division (NJ, NY, PA): increased 1.1 percent (4.5 percent, annualized) in the third quarter of 2009. Over the last 12 months, home values decreased 2.5 percent, and during the last five years, home values increased 16.2 percent.

South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): rose 0.6 percent (2.6 percent, annualized) in the third quarter of 2009. Over the last 12 months, home values decreased 5.0 percent, and during the last five years, home values increased 7.9 percent.

West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 0.5 percent (2.0, annualized) in the third quarter of 2009. Over the last 12 months, home values decreased 1.1 percent; over the last five years, home values increased 5.2 percent.

East South Central Division (AL, KY, MS, TN): increased 0.2 percent (0.6 percent, annualized) in the third quarter of 2009. Over the last 12 months, home values decreased 1.4 percent, and during the last five years, home values increased 15.4 percent.

East North Central Division (IL, IN, MI, OH, WI): rose 0.2 percent (0.6 percent, annualized) in the third quarter of 2009. Over the last 12 months, home values decreased 2.7 percent, and during the last five years, home values decreased 2.5 percent.

West South Central Division (AR, LA, OK, TX): grew 0.1 percent (0.5 percent, annualized) in the third quarter of 2009. Over the last 12 months, home values were unchanged, and during the last five years, home values increased 20.5 percent.

Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): decreased 0.6 percent (-2.5 percent, annualized) in the third quarter of 2009. In the last 12 months, home values decreased 9.3 percent; during the last five years, home values increased 7.7 percent.

New England Division (CT, MA, ME, NH, RI, VT): declined 0.7 percent (-2.6 percent, annualized) in the third quarter of 2009. Over the last 12 months, home values decreased 2.4 percent, and during the last five years, home values declined 1.7 percent.