Home prices increased at an annualized rate of 4.0% nationwide in the third quarter, down from a revised rate of 5.2% in the second quarter, according to the Conventional Mortgage Home Price Index released by Freddie Mac.The Mountain states recorded the biggest price increases, with a 7.1% annualized growth rate, Freddie Mac said. The West South Central states of Arkansas, Louisiana, Oklahoma, and Texas experienced the second-highest annualized gains in the third quarter, with a 6.7% growth rate, and the East South Central states of Alabama, Kentucky, Mississippi, and Tennessee came in third, at 6.4%. "It takes between six and 18 months for the economy to fully react to [Federal Reserve Board] actions, and housing is the most interest-rate-sensitive segment of the economy," said Frank Nothaft, Freddie Mac's chief economist. "Thus, it isn't surprising that the housing sector is now showing such a strong reaction to higher rates." The index was jointly developed by Freddie Mac and Fannie Mae. Freddie Mac's website address is http://www.freddiemac.com.

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