Freddie Mac: Declining Mortgage Rates Boost Second Qtr. Home Prices "Sharply"
MC CLEAN, Va. - Consumers in the market for buying a home in recent months don't need to be reminded just how much home prices have gone up. But Freddie Mac's quarterly national Conventional Mortgage Home Price Index for the second quarter 2005 confirms the nationwide trend. The CMHPI rose 15.0% in the second quarter on an annualized basis, up from a revised first quarter 2005 annualized rate or 10.5% and a fourth quarter 2004 annualized rate of 9.8%. Freddie Mac VP and Chief Economist Frank Nothaft said, "The steady decline of fixed mortgage rates during the second quarter helped to propel home sales higher and drive up house prices." According to the Primary Mortgage Market SurveyT, he explained, the weekly average rate for 30-year fixed rate mortgages dropped from a high of 6.04% the week of March 31st to a low of 5.53% the week of June 30th. Meanwhile, home sales in the second quarter rose to an annualized record level of 7.62 million units. Freddie Mac's Conventional Mortgage Home Prime Index continues to show strong growth, primarily along the coastal areas where populations are rapidly growing, job growth is strong and land scarcity is pushing up the cost of housing, he offered. Nothaft said home sales and housing starts are still expected to set a new record in 2005. "The devastating effects of Hurricane Katrina will likely drive up costs of construction materials once the rebuilding effort gets underway and may slow deliveries of new homes in other areas of the country as resources are reallocated to Louisiana, Mississippi and other areas affected by the storm." Nationally, Freddie Mac said home values increased 13.2% on an annual basis, from the second quarter 2004 through the second quarter 2005. For the ninth consecutive quarter, the Pacific states led the country in annual house-price appreciation - 21.1%. The South Atlantic states came in second, with a 17.3% growth rate, followed by the Middle Atlantic states - 15.8%. Following that were the Mountain states with an annual appreciation rate of 15.4%; New England states, 13.7%; West North Central states, 7.9%; East North Central States, 7.0%; the East South Central states, 6.8%; and the West South Central states, 5.1%. As for the effect of Katrina on home values, Nothaft noted that over the past 12 months ended in June 2005, homes in the Gulfport-Biloxi, Miss. Area gained 4.1% in value, while homes in Mobile, Ala. and New Orleans gained value at 6.3% and 7.4% respectively. "We have no way at the moment to know the extent of the damage or how long it will take to rebuild and repair damaged homes in these areas," he said, adding that "We may see stronger growth in home prices in nearby cities such as Baton Rouge as some people relocate there and commute to their jobs once factories and plants are up and running again." -