So you thought that home value appreciation would continue its slow, moderate downward drift? You thought real estate hyperinflation was long gone?

Better think again. The latest quarterly federal home price study shows that existing home values began to soar in the last three months of 2003 -- with over 60 metropolitan real estate markets turning in double-digit annualized appreciation rates.

The average home in the U.S. gained 7.97 percent in resale value last year, according to the Office of Federal Housing Enterprise Oversight (OFHEO). But the average home in California and the District of Columbia jumped by nearly 14 percent in value, the average home in Maryland gained nearly 13 percent, New Jersey 12 percent, New York and Florida well over 11 percent.

Only a handful of states saw average values rise by less than four percent for the year -- the rate that some mortgage and real estate economists had forecast would be the national average. Homes in Utah gained just 1.6 on average in 2003, Texas 2.63 percent, and Colorado 2.68 percent, the lowest three in the country.

The latest statistics come from OFHEO's comprehensive housing price index survey, which monitors value changes within a vast database of homes sold or refinanced during the past and prior years. All the houses were financed or refinanced by Freddie Mac or Fannie Mae.

The 3.67 percent quarterly gain in home values nationwide surprised economists at OFHEO and elsewhere, since they had earlier projected a slow, steady decline in the rate of appreciation throughout 2003. Earlier quarters had followed that pattern -- trending downward to the four and five percent ranges -- but the final quarter of the year jumped off the charts.

Patrick Lawler, chief economist for OFHEO, attributed the fourth quarter boom in home market values to the turnaround underway in the US. economy as a whole.

"Rising incomes and (mortgage) borrowing costs below 6 percent" pushed the annualized national rate to an unexpectedly torrid 14.67 percent, said Lawler.

OFHEO emphasized the "widespread" nature of the housing gains, affecting every region and markets within virtually every state. All but two states' housing values increased in the fourth quarter. Only 3 of the 220 metropolitan markets tracked by OFHEO turned in negative growth rates -- Dallas, Texas; Montgomery, Alabama; and Hickory-Morganton, North Carolina -- as compared to 19 markets in the second quarter of 2003.

Florida and California produced eye-popping annual appreciation rates last year, such as 19.3 percent in fast-growing Fort Pierce-St. Lucie, Florida, 16.6 percent in metropolitan Los Angeles, 16 percent in San Diego, 15 percent in West Palm Beach-Boca Raton.

San Diego houses have jumped in market value by a stunning 93 percent in the last 5 years alone, the highest rate of any large metropolitan market in the country. New York area homes have risen by 72 percent on average during the same period, while metropolitan Washington DC homes have gained 64 percent.

How long can housing hyperinflation keep going? Economists say it's got to cool off, it's not sustainable over a long period. Then again, if mortgage interest rates stay near historical lows and income growth is solid in a recovering U.S. economy, what's in sight to change the equation?

(The full Housing Price Index for the 4th quarter, plus specifics for all states and more than 220 metropolitan housing markets, is available at www.ofheo.gov.)

Published: March 8, 2004

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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, consmer 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.