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Housing market cools down as Home-price rises Print E-mail
Thursday, 07 September 2006

WASHINGTON - U.S. home prices continued to rise in the second quarter but showed the biggest slowdown in three decades.

Average home prices rose 1.17 percent in the April-June period, compared with 3.65 percent in the second quarter of 2005 — the biggest decline in price growth since OFHEO started keeping track of home prices in 1975, the new report showed.

The figures released by the Office of Federal Housing Enterprise Oversight, the agency that oversees the big mortgage-finance companies Fannie Mae and Freddie Mac, provided the latest indication that the housing market is cooling substantially.

The second-quarter figure is derived from an average of home prices in April, May and June. Prices in that April-June period were up 1.17 percent from the first quarter of the year — the smallest rate of quarterly price growth since a 1.12 percent gain in the fourth quarter of 1999, OFHEO said.

Data issued last month provided proof that the housing boom is over. The Commerce Department reported that sales of new homes dropped in July by 4.3 percent, the largest amount since February, while the inventory of unsold homes climbed to a record high. And sales of previously owned homes fell 4.1 percent in July to a 2 1/2-year low, according to the National Association of Realtors.

Sales of both new and existing homes set records for five consecutive years as the housing industry enjoyed a boom powered by the lowest mortgage rates in four decades. But rates have been steadily rising this year as the Federal Reserve tightens credit conditions as a way to slow the economy and keep inflation under control.

All 50 states and the District of Columbia showed increases in home prices from last year’s second quarter to the same period this year, but five states — Maine, Massachusetts, Indiana, Ohio and Michigan — registered small price declines in the most recent second quarter from the first.

Home prices continue to increase relatively strongly in Louisiana and Mississippi, the two states hardest hit by Hurricane Katrina a year ago. Year-to-year rates for the second quarter were well above the national average in several metropolitan areas in the affected area, including New Orleans-Metairie-Kenner and Baton Rouge in Louisiana, and Gulfport-Biloxi and Pascagoula in Mississippi. The latter two, in fact, logged their strongest price increases since the 1975 start of OFHEO’s tracking.

The South Atlantic area — with Delaware, the District of Columbia, Maryland, Virginia and Florida — registered its biggest slowdown in prices since at least the early 1980s. Its year-to-year rate for the second quarter slid to 13.7 percent from 17.4 percent in 2005.
In New England, the year-to-year rate dropped to 5.68 percent from 8.71 percent.
Despite a year-to-year decline of 9 percentage points, house prices in Arizona still showed the highest growth rate of all the states, about 24 percent.
Metropolitan areas in North Carolina, South Carolina and Washington state have entered the list of markets with the fastest growing prices.

Edwina Baniqued



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