The latest home-value appreciation data compiled by mortgage industry giant Freddie Mac offer plenty of encouragement to the nation’s homeowners. Values across the country continue to rise at impressive rates even in the face of a soft economy and bearish stock market. Some markets are racking up annualized appreciation rates well into the double digits.

Year-to-year gains in resale values, measured from the second quarter of 2001 through the second quarter of this year, averaged 6.3 percent across the country. More impressive : the annualized quarterly rate of gain nationwide came in at a sizzling 7.6 percent. Individual metropolitan areas studied by Freddie Mac racked up appreciation rates well into the teens. These include Bergen County, N.J. (up 19.9 percent), Ft. Myers, FL (up 19.8 percent), Ventura, CA (up 19.1 percent) Nassau and Suffolk, Long Island, NY (up 18.3 percent) Ft. Lauderdale, FL (up 16.4 percent) and the metropolitan Washington D.C area (up by 15.7 percent).

In an interview with RealtyTimes, Freddie Mac chief economist Dr. Frank Nothaft pointed out that the latest quarterly performance by housing reflects in part the near-record low mortgage rates that have characterized much of 2002. However, he added, the overall trend line on values is for a moderation in appreciation rates--a slow decrease in the rate of growth. For the past five quarters, in fact, said Nothaft, the annual rate of appreciation has been on the decline. From a high of nearly 9.2 percent annual appreciation in early 2001, as measured quarterly by Freddie Mac, the rate was down to 6.3 percent by the end of the second quarter of 2002.

“But that is still a very robust rate,” said Nothaft, given the state of the economy in other sectors.

Hottest regional markets in the latest study : the Mid-Atlantic states, where home values rose at a 13.8 annualized rate in the second quarter. Next come the New England states, with an annualized 12.7 percent rate of gain. The Pacific states rank next regionally with a 9.7 percent annualized rate of gain. At the other end of the spectrum, home values in the Mountan states rose by a more moderate 3.8 percent. The weakest quarterly performance came in the four states of Alabama, Mississippi, Tennessee and Kentucky, where values were up a composite 1.8 percent on an annualized basis.

More significant than quarterly appreciation for most homeowners around the country: the longer-term record. How much did the average house grow in value over the past five years? The national data can only bring smiles to millions of faces: Even in the slowest-gaining four states mentioned above, the average increase in home values was 26 percent over the past five years. In the hottest regions--New England, the Pacific states and the mid-Atlantic--the average gains have been well above that: 62.3 percent, 52.3 percent and 45.4 percent, respectively.

In other words, the average house purchased in the New England region for $200,000 in 1997 added nearly $125,000 in resale value in the following 60 months.The same $200,000 unit purchased five years ago in the Pacific region would now sell for about $305,000. And a house bought for $200,000 five years ago in the mid-Atlantic regional market would now sell for around $291,000.

Put your money in the stock market? Mutual funds? IPOs? As they say in the mid-Atlantic states: Fuhgeddaboutit! The only real capital gains action has been in residential real estate.

Published: September 9, 2002

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.