Reports from GSE data released
By CHRISTY ROBINSON
12/4/2002

Home value appreciation slowed in the third quarter, according to a federal report, a sign that the housing industry's record run is nearing the finishing line.

The national average appreciation during the quarter was .84%, compared with 2.39% in the second quarter, according to the Office of Federal Housing Enterprise Oversight (OFHEO).

The report also revealed a 6.16% increase in U.S. home prices from third quarter 2001 to third quarter 2002.

"The rate of home price growth will continue to ease into 2003, averaging 5 to 5.5% for the U.S., and certain areas will undoubtedly begin to experience some negative growth," Freddie Mac chief economist Frank Nothaft said in a quarterly report.

The OFHEO's house price index measures changes in the value of single-family homes in the United States as a whole, within various regions of the country, and in the states and District of Columbia. The agency uses information provided by Fannie Mae and Freddie to compile the quarterly report.

During the third quarter, seven states experienced negative growth: Vermont, Illinois, Kansas, Michigan, Wisconsin, South Dakota, and Alaska, the report said.

From third quarter 2001 to third quarter 2002, appreciation varied among the geographical break-downs.

Rhode Island was the state with the highest home price increase at 14.06%, and the state with the lowest increase was Utah with 2.07%.

The area with the highest increase in the nation was Nassau-Suffolk, N.Y., at 14.69%., and the area in the country with the lowest increase was San Jose, Calif., with -.39%.

Average home prices in the Pacific region increased the most at 1.6% during the third quarter. They increased the least in the East North Central region with 0%.

Between third quarter 2001 and third quarter 2002, home prices increased the most at 9.8% in the New England region. The average increase was lowest at 3.1% in both the East South Central and West South Central regions.

In spite of the OFHEO's report on price appreciation, the National Association of Realtors (NAR) projects that home sales will remain strong in 2003, even if they do slip a bit.

David Lereah, NAR's chief economist, said the market has performed better than expected, largely because of low mortgage interest rates throughout the year.

He said NAR now expects 2002 existing-home sales to finish with 5.52 million units, up 4.2% from last year's record of 5.30 million.

"In 2003, sales should ease off to 5.29 million, but that would be just shy of the 2001 record -- and it'll be the fifth year that existing-home sales exceed the 5.0-million benchmark," he said in NAR's December outlook report.

Freddie experts see a silver lining as well. They expect single-family mortgage originations to increase with the current low mortgage rates, and have revised the forecast for originations upward to a record $2.3 trillion by the end of 2002.

"The refinance boom continues as mortgage rates reached a 37-year low in November," Nothaft said. "The appreciation in home values has enabled families to tap into some of their home equity to bolster spending on home improvements, consumer goods, and investments."

Since 1980, house prices have appreciated 181.6%, the OFHEO report said.

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