America's home value appreciation rate is hot, hot, hot -- hotter than any time in nearly three decades, according to the latest federal statistical study.

Though most housing and mortgage market economists had forecast a steady slowing of appreciation rates for 2004, home values have instead accelerated. The home price inflation rate hit a 25-year high of 12.97 percent in the third quarter of 2004, measured against the third quarter of 2003.

But 12.97 percent barely hints at how torrid the housing inflation rate really is, said the Office of Federal Housing Enterprise Oversight (OFHEO), the agency that tracks home price movements in more than 250 metropolitan and rural markets. OFHEO's database sample comprises over 28.8 million repeat sales and refinancings on existing single-family properties spread across the country. Since the houses were all financed or refinanced through Fannie Mae or Freddie Mac, OFHEO has direct access to the properties' selling prices and appraisals.

The annualized quarterly rate for the country as a whole during the third quarter was 18.48 percent -- also the highest recorded by the Home Price Index in its 29 years of existence. But dozens of large metropolitan areas far outstripped even that rate on an annual basis. Consider these eye-popping numbers:

• On a year-to-year basis, home values rose by 35.78 percent in Nevada, according to OFHEO, followed by Hawaii (28.29 percent), California (27.18 percent), Washington DC (23.95 percent), Rhode Island (22.54 percent), and Maryland (22.32 percent).

• Thirteen states had annual appreciation rates in excess of 15 percent, and 26 states had rates in double digits, another first. Even the slowest appreciating states had rates close to or higher than 4 percent. As recently as mid-1998, by contrast, 4 percent was the average annual appreciation rate for the U.S. as a whole. No states in the latest study experienced a decrease in home values during the preceding 12 months.

• A handful of individual metropolitan housing markets literally went off the charts in the latest OFHEO data. Homes in the Las Vegas-Paradise market gained 41.74 percent in resale value over the last 12 months, followed by Riverside-San Bernadino, CA (33.81 percent) and Reno, NV (31.9 percent).

• Among the metropolitan areas with the highest populations that experienced super-heated appreciation, Los Angeles took the top of the list at 30.47 percent, followed by San Diego at 30.42 percent. Eleven of the top 20 appreciating markets were in California.

• Hottest markets outside of California and Nevada were along the East coast: Port St. Lucie, FL (28.15 percent), Palm Bay-Melbourne, FL (28.06 percent), Washington DC (including VA, MD and West Virginia, up 24.01 percent), Punta Gorda, FL (23.84 percent) and Atlantic City, NJ (23.65 percent).

• Slowest appreciating metropolitan markets tended to be in areas where local economic growth has been weak and unemployment is a problem -- Lafayette, IN (0.10 percent appreciation over the last year), Ogden, UT (1.12 percent growth), Anderson, SC (1.27 percent) and Austin, TX (2.08 percent).

OFHEO chief economist Patrick Lawler attributed the appreciation rate spurt to two possible factors: Continued low mortgage rates -- hovering just above 40-year lows for much of 2004 -- and a statistical quirk caused by the phaseout of the refinancing boom. Lawler believes the appraisals used to value many refinanced properties during the past few years could have understated the actual market worth of the houses. That, in turn, could cause a spike in the reported prices of the houses when they are resold and appraised for new purchasers.

The full Housing Price Index study is available at www.ofheo.gov.

Published: December 6, 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.