September 28th, 2008 9:00 AM by Lehel Szucs
McLean, VA – Freddie Mac (NYSE: FRE) announced today that its Conventional Mortgage Home Price Index (CMHPI) Purchase-Only Series registered a modest 0.4 percent annualized decline in U.S. home values during the second quarter of 2008, following a downward revised 10.8 percent annualized drop in the first quarter. Over the four quarters ending with the second quarter of 2008, home sales prices fell an average of 6.0 percent in the CMHPI Purchase-Only Series – the largest annual fall in values over the 39-year history of the series.
"While U.S. home value indexes continued to decline, an encouraging sign has been the significant moderation in the rate of decline of the Purchase-Only series," said Frank Nothaft, Freddie Mac vice president and chief economist. "After falling sharply over the prior two quarters – more than a 10 percent annualized drop – home value depreciation slowed substantially to only a 0.4 percent annualized rate. While we expect to see further declines in average U.S. home values throughout this year and into 2009, we will be watching for signs of stabilization in indicators of real housing activity, such as a leveling off in home sales and for-sale inventories.
"Another good sign was that home values in some parts of the U.S. have remained stable or edged up. Most areas in the West South Central region (Arkansas, Louisiana, Oklahoma and Texas) experienced price gains over the quarter and the past year."
Thirteen states registered price gains over the past year, and 33 states had increases in the second quarter, according to the CMHPI Purchase-Only Series. Modest annual price gains of 2 percent or more occurred in North Carolina, North Dakota, Oklahoma, South Dakota, Texas and West Virginia which have benefited from stronger local economies. Annual drops of more than 10 percent occurred in Arizona, California, Florida, Michigan and Nevada, which have experienced either weak local economic conditions or overbuilt markets.
The CMHPI Purchase-Only Series excludes all refinancings in its calculation. Freddie Mac also produces a CMHPI Classic Series that includes data from both home purchase transactions and mortgage refinancings, with the latter values based on appraisals. The Classic Series tends to lag changes in the Purchase-Only Series because of the inclusion of refinanced loans. The CMHPI Classic Series indicated that home values fell 7.3 percent nationally during the second quarter on an annualized basis, the steepest quarterly decline since 1971. Over the year ending with the second quarter, home values depreciated 2.9 percent on average in the Classic Series, the first annual drop in this index over the 39 years spanned by the series.
The Conventional Mortgage Home Price Index (Purchase-Only) Series shows the following regional performances:
West South Central Division (AR, LA, OK, TX): rose 1.7 percent (7.0 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values increased 1.6 percent, and during the last five years, home values increased 27.3 percent.Middle Atlantic Division (NJ, NY, PA): decreased 0.5 percent (–2.2 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 2.6 percent, and during the last five years, home values increased 38.8 percent.East South Central Division (AL, KY, MS, TN): increased 1.7 percent (7.0 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 0.2 percent, and during the last five years, home values increased 26.7 percent.East North Central Division (IL, IN, MI, OH, WI): increased 1.8 percent (7.5 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 4.0 percent, and during the last five years, home values increased 8.5 percent. Mountain Division (AZ, CO, ID, MT, NM, NV, UT, WY): decreased 0.6 percent (–2.6 percent, annualized) in the second quarter of 2008. In the last 12 months, home values decreased 5.6 percent; during the last five years, home values increased 39.5 percent.West North Central Division (IA, KS, MN, MO, ND, NE, SD): increased 1.9 percent (7.7 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 2.3 percent; over the last five years, home values increased 15.8 percent.South Atlantic Division (DC, DE, FL, GA, MD, NC, SC, VA, WV): decreased 0.3 percent (–1.0 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 5.5 percent, and during the last five years, home values increased 33.7 percent.New England Division (CT, MA, ME, NH, RI, VT): increased 0.3 percent (1.2 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 5.1 percent, and during the last five years, home values increased 18.1 percent.Pacific Division (AK, CA, HI, OR, WA): decreased 3.5 percent (–13.1 percent, annualized) in the second quarter of 2008. Over the last 12 months, home values decreased 16.5 percent, and during the last five years, home values have increased 29.5 percent.
Jointly developed by Freddie Mac and Fannie Mae and first published by Freddie Mac starting in 1994, the Conventional Mortgage Home Price Index features indexes for the nine Census divisions as well as a national index. The national index is the average of the nine divisional indexes weighted by the distribution of one-unit detached, single-family structures in each Census division.
Unlike other home price indexes based on mean or median values of homes sold during a given period, the Conventional Mortgage Home Price Index is constructed, using regression techniques, from observations of actual sales prices or appraised values of the same homes over time. The street addresses of properties that serve as collateral for mortgages funded by the two secondary mortgage market firms are first processed using software certified by the United States Postal Service to create a uniform address format and are then matched to identify consecutive transactions on the same property. There are currently more than 35 million records in the repeat-transactions database used to construct the classic Conventional Mortgage Home Price Index – this database includes transactions on one-unit detached and single-family townhome properties serving as collateral on loans originated through the second quarter of 2008 and purchased by Freddie Mac and Fannie Mae by July 31, 2008.
Freddie Mac publishes the Conventional Mortgage Home Price Index each quarter. Index values and growth rates for the nation as a whole as well as for the nine Census divisions, the 50 states and the District of Columbia, and 392 metropolitan statistical areas (MSAs) and metropolitan divisions under the classic series of the CMHPI are available and the purchase-transaction only series is available for the nation and nine Census divisions. All of the CMHPI series can be found on Freddie Mac's web site, www.freddiemac.com/finance/cmhpi/.
Freddie Mac is a stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac raises capital on Wall Street and throughout the world's capital markets to finance mortgages for families across America. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.
Notes: *These indices rely on data from only home-purchase transactions.
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