by Calculated Risk on 3/01/2006 10:00:00 AM

The Office of Federal Housing Enterprise Oversight (OFHEO) released the Q4 2005 House Price Index.

HOUSE PRICE APPRECIATION CONTINUES AT ROBUST PACE
OFHEO House Price Index Shows Annual Rise of Nearly 13 Percent;
Unprecedented Increases in 26 Metropolitan Areas

WASHINGTON, D.C. – Average U.S. home prices increased 12.95 percent from the fourth quarter of 2004 through the fourth quarter of 2005. Appreciation for the most recent quarter was 2.86 percent, or an annualized rate of 11.4 percent. The increase during 2005 is similar to the revised increase of 12.55 percent for the year ended with the third quarter of 2005, showing no evidence of a slowdown. The figures were released today by OFHEO Acting Director Stephen A. Blumenthal, as part of the House Price Index (HPI), a quarterly report analyzing housing price appreciation trends.

"Despite recent indications that a slowdown may be forthcoming, house price appreciation during 2005 continued to hover at near-record levels," said OFHEO Chief Economist Patrick Lawler.

House prices continued to grow considerably faster over the past year than did prices of non-housing goods and services reflected in the Consumer Price Index. House prices rose 12.95 percent, while prices of other goods and services rose only 4.3 percent.

"While deceleration continues in some areas, appreciation generally is still extremely strong," said Lawler. "Mortgage rates climbed significantly during the second half of last year, but the effect of that increase on price appreciation so far appears to be limited."

This HPI report ranks 10 additional Metropolitan Statistical Areas (MSAs) due to an increase in the number of mortgage transactions in those areas.

Significant findings in the HPI:

1. Four-quarter appreciation rates were at record levels in 26 metropolitan areas including Orlando-Kissimmee, FL; El Paso, TX; and Myrtle Beach-
Conway-North Myrtle Beach, SC.

2. Phoenix-Mesa-Scottsdale, AZ continues to be the MSA with the greatest appreciation rate of 39.7 percent.

3. Appreciation in Arizona continues to surpass price growth in other parts of the country by a wide margin. Appreciation was 34.9 percent between the fourth quarter of 2004 and the fourth quarter of 2005. This is more than eight percentage points greater than the rate in Florida, the second fastestappreciating state.

4. The Mountain Census Division became the fastest appreciating area of the country, edging out the Pacific Census Division. The area with the slowest price growth continues to be the East North Central Division, which includes Michigan, Wisconsin, Illinois, Indiana and Ohio.

5. Price growth in the South Atlantic Census Division which includes East Coast states from Maryland to Florida, was at its highest rate since 1975, the beginning of the period covered in OFHEO’s House Price Index. Home prices grew by 17.81 percent between the fourth quarter of 2004 and the fourth quarter of 2005.

6. For the first time since the third quarter of 2003, one of the MSAs included in OFHEO’s appreciation-rate ranking experienced a four-quarter price decline. Prices in Burlington, NC fell by approximately one percent between the fourth quarter of 2004 and the fourth quarter of 2005.

UPDATE: From a bubble perspective, three of the most closely watched cities have been Boston, Sacramento and San Diego - all three have shown signs of a housing slowdown.

Boston prices increased 1.5% in Q4 2005 and 7.3% for 2005.

Sacramento prices increased 2.7% for the quarter, and 18.7% for the year.

San Diego prices increased 2.2% for the quarter, and 11% for the year.

Any housing slowdown for these areas is not evident in the Q4 House Price Index.