Index Shows Accelerated Nationwide Value Declines
McLean, VA-Freddie Mac's Conventional Mortgage Home Price Index Purchase-Only Series, which excludes all refinancings, marked the largest annual decrease in its 39-year history in 2008.
It showed a 17.9% annualized decline in U.S. house prices during the fourth quarter of 2008, following a downward revised 8% annualized drop in the third quarter.
Depreciation is also reflected in the fact that over the year home sales prices fell an average of 9.5% in the CMHPI Purchase-Only Series.
"The deepening recession and the large inventory of for-sale homes continued to push home values down," said Frank Nothaft, Freddie Mac vice president and chief economist.
"While historically low interest rates on long-term fixed-rate mortgages help the housing market, demand for homes was weakened by rising unemployment, wealth declines from declining stock market valuations and general lack of consumer confidence."
For the second consecutive quarter, the index shows that "every region of the nation experienced flat or declining home values," he said. Yet, the fourth quarter "marks the first time that year-over-year declines in home values were recorded in each of the nine regions of the country."
Mr. Nothaft noted, however, that "the range was wide," with the West South Central Division experiencing declines of one-tenth of 1% over the year while the Pacific Division had a decline of 23%.
Regionally during the fourth quarter the index decreased by 1.6% (-6.4% annualized) in the West South Central Division (Arkansas, Louisiana, Oklahoma and Texas); 2.3% (-9% annualized) in the East South Central Division (Alabama, Kentucky, Mississippi and Tennessee); 2.7% (-10.3% annualized) in the Middle Atlantic Division (New Jersey, New York and Pennsylvania); and 3% (-11.6$ annualized) in the West North Central Division (Iowa, Kansas, Minnesota, Missouri, North Dakota, Nebraska and South Dakota).
In the Pacific (Alaska, California, Hawaii, Oregon and Washington) the index decreased 8.1% (-28.5% annualized) and in New England (Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island and Vermont) it dropped 3.3% (-12.5% annualized).
Freddie Mac also produces a CMHPI Classic Series that includes both home purchase transactions and mortgage refinancing data based on the latest appraisals.
Freddie notes, "Because appraisals are backwards looking through the use of recent comparable property transactions, the Classic Series will lag changes in the Purchase-Only Series."
The CMHPI Classic Series indicated that home values fell 1.9% nationally during the fourth quarter on an annualized basis, much lower than the revised third-quarter decline of 11.5%. Over the year ending with the fourth quarter, home values depreciated 6% on average in the Classic Series.
It is important to observe that while home values in most regions declined during the past year, aggregated data including a five-year period of time show these values are nonetheless higher with time - with few exceptions.
For example, in the Mountain Division, (Arizona, Colorado, Idaho, Montana, New Mexico, Nevada, Utah and Wyoming), the index declined 5% (-18.7% annualized) in the fourth quarter. In the last 12 months, home values decreased 9.2%, but during the last five years, home values increased 24.6%.
In the East North Central Division (Illinois, Indiana, Michigan, Ohio and Wisconsin), the index decreased 4.9% (-18.3%, annualized) in the fourth quarter. Over the last 12 months, home values decreased 5.8%, yet during the last five years, home values only decreased 0.1%. 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, Freddie Mac said.