Home price growth robust in second quarter

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Freddie Mac announced in September that according to its quarterly Conven-tional Mortgage Home Price Index, home values increased by an annualized rate of 4.6 percent nationwide in the second quarter of 2003. This rate is down from a slightly revised annualized rate of 5 percent for the first quarter of 2003. |ret||ret||tab|

"The second quarter saw the lowest mortgage interest rates in 45 years and corresponding record high home sales," said Frank Nothaft, Freddie Mac's chief economist, in a news release. |ret||ret||tab|

"Growth in home prices has slowed over the past two years from the 8 (percent) to 8 1/2 percent growth we saw in 2001 to a more sustainable growth rate of around 5 (percent) to 6 percent on an annual basis. Even with the higher interest rates we see today of around 6 14 percent, home-owning remains an attractive choice."|ret||ret||tab|

The index also showed that the annual house-price appreciation rate was 6 percent from the second quarter of 2002 through the second quarter of 2003.|ret||ret||tab|

The New England states returned as the leader in house price growth this quarter, rising at a vigorous annualized rate of 6.9 percent during the second quarter, followed by the Pacific states with appreciation of 6.3 percent. The South Atlantic states posted the third strongest gain for the nation with a home-price growth rate of 5.9 percent. The Middle Atlantic states slipped to fourth place this quarter from third place last quarter, registering a gain of 5.7 percent, and the East North Central states came next with a smaller increase of 3.3 percent.|ret||ret||tab|

The West North Central states, which include Missouri, showed a rise in home values of 3 percent, a rate of increase nearly matched by the East South Central states, which experienced a rise of 2.9 percent in home values. Finally, the Mountain states and the West South Central states tied for last place with each posting a healthy increase of 2.7 percent in home values, exceeding the second quarter's general inflation rate by 2 percentage points.|ret||ret||tab|

"The recent rise in mortgage interest rates will dampen refinance activity in the third quarter," Nothaft said. "Freddie Mac's weekly mortgage rate survey for 30-year fixed-rate mortgages topped 6.3 percent last week, and for the first time since July 2002, the refinance share of new mortgage applications slipped below 50 percent. However an improving economy should support continued strength in the housing market."|ret||ret||tab|

The refinance share of mortgage originations in 2002 was 59 percent. In 2003, Freddie Mac expects this share to rise to a record-setting 64 percent of originations and for home purchases to set a new record. Freddie Mac also expects single-family mortgage originations to be quite strong in 2003. With the low mortgage rates currently available, total single-family originations should top $3.1 trillion.|ret||ret||tab|

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.|ret||ret||tab|

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. |ret||ret||tab|

There are currently more than 24 million records in the repeat-transactions database used to construct the nine division indexes this database includes transactions on properties serving as collateral on loans originated through the second quarter of 2003 and purchased by Freddie Mac and Fannie Mae by July. |ret||ret||tab|

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.|ret||ret||tab|

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