McLean, VA – Freddie Mac announced yesterday that its quarterly Conventional Mortgage Home Price Index (CMHPI) found that home values rose 8.5 percent, on an annual basis, from the first quarter of 2003 through the first quarter of 2004, up from the prior year (first quarter of 2002 to first quarter of 2003) when the growth rate was 5.1 percent.

"The first quarter of the year was great for the housing market," said Amy Crews Cutts, Freddie Mac's deputy chief economist. "Low and declining mortgage rates over the quarter that bottomed out in March at 5.4 percent for 30-year, fixed rate mortgages, pushed homes sales to a healthy 7.37 million units (annualized rate) and this strong housing demand helped keep house price appreciation well ahead of overall inflation."

The quarterly growth rates show a significant decrease from the previous quarter values. Nationally, home values increased by an annualized rate of 5.6 percent in the first quarter of 2004. The fourth quarter 2003 annualized growth rate was revised upward to 17.9 percent.

"The quarterly growth rates in the first quarter are in line with the general trends over the past two years with the exception of the fourth quarter of 2003, which is very much an anomaly," said Cutts. "Quarterly data generally are more volatile, but the fourth quarter values seem to be very affected by biases created by the large volume of refinance activity in 2002 and earlier in the year. Normally we expect home prices nationally to grow about 2 to 3 percentage points faster than overall inflation due to home improvements and competition for land. The first quarter 2004 values are following this general pattern."

Published: June 3, 2004

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