OFHEO HOUSE PRICE INDEX: HOUSE PRICE GAINS CONTINUE TO ACCELERATE

U.S. House Prices Show Annual Rise of Nearly 13 Percent WASHINGTON, D.C. Average U.S. home prices increased 12.97 percent from the third quarter of 2003 through the third quarter of 2004. Appreciation for the most recent quarter was 4.62 percent, or an annualized rate of 18.48 percent. The figures were released today by Armando Falcon, Jr., Director of the Office of Federal Housing Enterprise Oversight (OFHEO), as part of OFHEO’s House Price Index (HPI).

The HPI is a quarterly report analyzing housing price appreciation trends. The appreciation reflected in this quarter’s report shows further acceleration from already rapid increases, said Falcon. The growth in house prices over the past year surpasses any increase in 25 years. The increase is particularly steep when compared to the price of non-housing goods and services, said Patrick Lawler, OFHEO Chief Economist.House prices grew 12.97 percent in the past year, while other goods and services as measured by the Consumer Price Index grew 2.68 percent.

Several factors could be playing a role in the large house price increases in the third quarter. Despite increases in the Federal Funds target rate, long-term interest rates decreased slightly, making it less expensive to purchase a house, Lawler said. That is one likely contributor to the increase; a drop in the number of refinancings is another. Refinancing volume fell last quarter substantially below levels in recent quarters. Previously, during the period of intense refinancing, HPI increases may have been held down because appraised values used for refinancing mortgages with low loan-tovalue ratios may not have kept up with recent market price increases. While the HPI includes data based on both purchase and refinance transactions, this quarter’s report also includes a comparison of the HPI with an index based solely on purchase transaction data. Also in this report, Metropolitan Statistical Areas (MSAs) have been revised to represent the areas defined by the Office of Management and Budget (OMB) in 2003 and based on 2000 Census data. As a result, this report now includes house price index data for 25 additional MSAs.