Home value appreciation is still robust in most parts of the country -- average annual rate of 5.61 percent nationwide -- according to the latest federal statistical study. But the rate of appreciation continues to moderate in some major markets that were among the hottest performers barely 18 to 24 months ago.

Metropolitan Boston, for example, turned in a 6.73 percent average rate from the third quarter of 2002 through the third quarter of this year, according to the Office of Federal Housing Enterprise Oversight. Though still well above the national average, Boston's rate of appreciation is down from the 12-13 percent annualized rates registered in 2000-2002. Real estate economists say slowdowns like Boston's are the beginning of a normal, cyclical pricing correction that should prove healthy for home buyers and home sellers.

Similar trends appear to be underway in high-cost metropolitan New York (6.21 percent appreciation rate versus 9-11 percent); Naples, Fla. (7.88 percent versus 10-12 percent) and San Francisco, Calif. (2.79 percent versus double digits for much of the past decade).

On a state-by-state basis, the hottest housing markets in the country are mainly on or near the Atlantic or Pacific coasts, with tiny Rhode Island at number one (a sizzling 13.35 percent average gain from 2002 to 2003), followed by California (9.7 percent), the District of Columbia (9.1 percent, treated as a state for statistical purposes), Maryland (8.65 percent), Florida (8.64 percent), New Jersey (8.45 percent), Hawaii (8.3 percent), Delaware (7.7 percent) and Maine (7.6 percent).

At the opposite end of the appreciation spectrum are Utah (1.8 percent for the year), Colorado (1.85 percent), Texas (2.36 percent), Indiana (2.6 percent), and North Carolina and Nebraska (both 2.72 percent).

Shelly Dreiman, chief economist for the Office of Federal Housing Enterprise Oversight, said local factory layoffs, out-migration and other local economic factors have been the key contributors to the relatively low appreciation rates in states like the six above. Utah experienced net out-migration of residents this past year, according to Dreiman, thereby diminishing demand for new and resale housing. North Carolina continues to experience serious losses of manufacturing jobs, especially in textiles.

Overall, according to Dreiman, housing's appreciation performance versus other segments of the economy is nothing short of impressive. Housing values -- buoyed in part by record-low mortgage rates -- continue to increase at more than double the rate of inflation seen in the cost of goods and services in the economy overall (5.6 percent versus 2.2 percent).

The hottest individual metropolitan markets -- the overachievers of residential real estate this year -- include Fresno, Calif. (a torrid 16.05 percent average gain); Ft.Pierce-Port St. Lucie, Fla. (14.7 percent); Providence, R.I. (12.03 percent); San Diego, Calif. (11.9 percent); Los Angeles, Calif. (11.61 percent); and Miami, Fla. (11.12 percent).

Softest major markets in the U.S. this year: Austin, Tex. (houses have lost about one-third of one percentage point in market value during the past year, according to the federal government); San Jose, Calif. (an average increase in market value of just 0.43 percent); Denver, Colo. (1.35 percent); Salt Lake City, Utah (1.73 percent) and Dallas, Tex. (2.05 percent).

The entire home price report, covering 200-plus markets, can be accessed at www.ofheo.gov.

Published: December 8, 2003

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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.