Even the experts are amazed by the latest home value gains in markets across the country -- an average 9.36 percent rate of appreciation from the second quarter of 2003 to the second quarter of this year.

But what's really a knockout at this stage of the real estate cycle, they say, are the record numbers of metropolitan markets where average annual appreciation is in the double digits (74), the record numbers of markets where annual appreciation exceeds 20 percent (10), and the fact that no market, anywhere in the country, has experienced a net decline in home values during the past year.

And then there is red-hot Las Vegas, where the year-to-year appreciation rate was 25 percent and the annualized quarterly rate of gain was an off-the-charts 32 ½ percent.

"These numbers are higher than just about anybody could have anticipated," says Douglas Duncan, chief economist of the Mortgage Bankers Association of America and a veteran analyst of home value movements. Duncan, like virtually all real estate and banking economists, had assumed that 2004 would bring more modest rates of appreciation as interest rates sloped upward and the market began a cool-down phase after five straight boom years.

But the latest quarterly data from the Office of Housing Enterprise Oversight (OFHEO), covering more than 200 metropolitan markets, had the highest national average rate of gain in 25 years. Even OFHEO chief economist Patrick Lawler said, "These data show no signs of the long-anticipated, and ultimately inevitable, slowing of house price inflation."

The latest quarterly appreciation rate is more than three times the rate of inflation for non-housing goods and services in the national economy, as measured by the Consumer Price Index. Home prices jumped 9.36 percent from the second quarter of 2003 through the same period this year. The CPI, by contrast, rose just 3.03 during the identical period.

As has been the case for much of the past decade, house price appreciation in the U.S. tends to be highest in the states and metropolitan areas that are on, or border, the Pacific and Atlantic Coasts. Of the top 20 hottest markets in the latest OFHEO survey -- all with average annual gains above 17 percent -- only two were located inland, and both of those were in Nevada (Las Vegas and Reno).

The five slowest-gaining markets were in Texas, Indiana, Utah and Colorado, according to OFHEO. But even in the states with the lowest appreciation rates, only two (Texas and Utah) had annual gains for housing prices below the 3.03 percent national CPI rate. Everywhere else houses outgained other goods and services.

What explains this unexpectedly vigorous performance of residential real estate? For one thing, interest rates have not risen as much as had been widely anticipated from their mid-2003 lows. Amy Cutts Crews, Freddie Mac deputy chief economist, says mortgage rates have remained at or below the 6 percent range for much of the past year -- dropping to 5.45 percent this spring -- in part because the national economy's post-recession comeback has not been as energetic as predicted.

Housing demand in the majority of markets remained strong for virtually the entire period covered by the latest OFHEO study, yet supplies of houses available for sale have been relatively tight. That, in turn, exerts upward pressure on prices.

Other factors are at work as well. National Association of Realtors chief economist David Lereah says the household debt-to-income ratio is in the 17 percent range -- well below the 22 percent-plus range historically associated with contractions in housing demand and prices. Low interest rates and the easy availability of home equity credit lines are allowing millions of American homeowners to lower their monthly debt service burdens by switching high-cost, non-deductible personal debts like credit card balances to lower-cost, deductible home equity debt.

The prospects for home appreciation in the months ahead? Freddie Mac's Cutts insists that "sooner or later we're going to see moderation" in prices, probably triggered by higher mortgages rates. Even so, says Cutts, calendar year 2004's overall national appreciation rate is likely to be in the 6 to 6 ½ percent range -- or double the current CPI. (The full OFHEO study, with detailed data on over 200 major realty markets, can be found at http://www.ofheo.gov.)