Housing Bubble
Home price growth moderates yet remains brisk in Q1 2003
June 03, 2003
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 5.1 percent nationwide in the first quarter of 2003. This rate is down from a revised annualized rate of 5.2 percent for the fourth quarter of 2002. There was, as had been expected, significant upward revision for the fourth quarter values indicating that the housing market in that quarter was stronger than originally estimated. These revisions reflect delays between origination and funding by Freddie Mac or Fannie Mae during a period of strong home-value appreciation.
"The rise in home values continues to add to homeowner equity across the nation. The average single-family home has increased in value in each state, both in the last quarter as well as year-over-year," said Frank Nothaft, Freddie Mac chief economist. "Offsetting the moderate rise in home values, however, is the current generational low in mortgage rates, which makes buying and owning a home more affordable to a larger number of families."
The index also showed that the annual house-price appreciation rate was 6.4 percent from the first quarter of 2002 through the first quarter of 2003. The annual growth rate ending with the first quarter of 2003 is the slowest since the annual growth rate through the fourth quarter of 1999.
The Pacific States captured the lead in house price growth this quarter, rising at a vigorous annualized rate of 7.8 percent during the first quarter, followed closely by the New England States with a robust growth rate of 7.5 percent. The Middle Atlantic States once again showed the third strongest gains for the nation, as it did in the last quarter, with a home-price growth rate of 7.0 percent. The South Atlantic States posted gains of 5.8 percent, and the West North Central States came next with a smaller increase of 3.6 percent.
The East South Central States registered a rise in home values of 3.5 percent, a rate of increase nearly matched by the East North Central States, which experienced a rise of 3.4 percent in home values. Finally, the West South Central States saw a modest increase of 3.3 percent in home values as homeowners in the Mountain States trailed the nation with a more meager growth rate of 2.5 percent.
“The refi boom should run out of steam in the second half of the year, but falling mortgage rates continue to fuel the industry,” noted Nothaft. “Freddie Mac’s weekly mortgage rate survey for 30-year fixed-rate mortgages set a new 45-year low last week of 5.31 percent and currently more than 75 percent of new mortgage applications continue to be for refinance.”
The refinance share of mortgage originations in 2002 was 59 percent. In 2003, Freddie Mac expects this share to rise to a record-setting 62 percent of originations and for home purchases to set a new record.
Freddie Mac economists expect single-family mortgage originations to be quite strong in 2003. With the low mortgage rates currently available, total single-family originations should top $2.7 trillion.
The Conventional Mortgage Home Price Index shows the following regional performances:
- Pacific Division (AK, CA, HI, OR, WA): increased 1.9 percent (7.8 percent, annualized) in the first quarter of 2003. Over the last 12 months, home values increased 10.3 percent, and during the last five years, home values have increased 58.4 percent.
- New England Division (CT, MA, ME, NH, RI, VT): increased 1.8 percent (7.5 percent, annualized) in the first quarter of 2003. Over the last 12 months, home values increased 10.2 percent, and during the last five years, home values increased 67.0 percent
- Middle Atlantic Division (NJ, NY, PA): increased 1.7 percent (7.0 percent, annualized) in the first quarter of 2003. Over the last 12 months, home values increased 9.4 percent, and during the last five years, home values increased 48.0 percent.
- South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): increased 1.4 percent (5.8 percent, annualized) in the first quarter of 2003. Over the last 12 months, home values increased 7.0 percent, and during the last five years, home values increased 38.0 percent
- West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 0.9 percent (3.6 percent, annualized) in the first quarter of 2003. Over the last 12 months, home values increased 5.0 percent, and during the last five years, home values increased 38.5 percent.
- East South Central Division (AL, KY, MS, TN): increased 0.9 percent (3.5 percent, annualized) in the first quarter of 2003. Over the last 12 months, home values increased 3.7 percent, and during the last five years, home values increased 23.5 percent.
- East North Central Division (IL, IN, MI, OH, WI): increased 0.8 percent (3.4 percent, annualized) in the first quarter of 2003. Over the last 12 months, home values increased 3.7 percent, and during the last five years, home values increased 29.3 percent.
- West South Central Division (AR, LA, OK, TX): increased 0.8 percent (3.3 percent, annualized) in the first quarter of 2003. Over the last 12 months, home values increased 4.0 percent, and during the last five years, home values increased 28.2 percent.
- Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): increased 0.6 percent (2.5 percent, annualized) in the first quarter of 2003. In the last 12 months, home values increased 3.7 percent, and during the last five years, home values increased 29.1 percent.
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.
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 21 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
Conventional Mortgage Home Price Index |
||||||||||
All Entries Are Percent Changes |
New England |
Middle Atlantic |
South Atlantic |
East South Central |
West South Central |
West North Central |
East North Central |
Mountain |
Pacific |
The United States |
|
||||||||||
|
Quarterly Change |
1.8 |
1.7 |
1.4 |
0.9 |
0.8 |
0.9 |
0.8 |
0.6 |
1.6 |
1.3 |
|
||||||||||
|
Annualized |
7.5 |
7.0 |
5.8 |
3.5 |
3.3 |
3.6 |
3.4 |
2.5 |
7.8 |
5.1 |
|
||||||||||
|
Annual Change |
10.2 |
9.4 |
7.0 |
3.7 |
4.0 |
5.0 |
3.7 |
3.7 |
10.3 |
6.4 |
|
|
||||||||||
5-Year Change |
67.0 |
48.0 |
38.0 |
23.5 |
28.2 |
38.5 |
29.3 |
29.1 |
58.4 |
39.0 |
|
||||||||||
Annualized 5-Year Change |
10.8 |
8.2 |
6.7 |
4.3 |
5.1 |
6.7 |
5.3 |
5.2 |
9.6 |
6.8 |
Source: Freddie Mac
