Housing Growth Is Strong Nationwide, Agency Reports

Whatever the doomsayers may tell you about the weakening economy and the inevitable dire effects on the value of your home, you should know this: The sole federal agency that tracks the market values of homes nationwide has just documented a slight--very slight--softening in the rate of appreciation of American housing values.

But the annualized rate of appreciation for the average home during the first half of 2001 was still a hefty 7.8%. While that’s down from the torrid annual rate of 9.5% in 2000--the highest recorded in the last two decades--it’s still more than twice the rate of inflation.

With prices rising in the economy overall by about 3.7%, excluding shelter-related costs, housing value growth at 7.8% in 2001 shows that American consumers “choose to [invest in] housing over and above many other goods and investment vehicles,” according to the Office of Federal Housing Enterprise Oversight. That agency monitors the value changes in a vast database of more than 14 million home-sale and refinancing transactions.

Its latest study, covering value changes through June of this year, found that:

* Home price appreciation is still at 10% or above on an annualized basis in 49 of the 180 largest metropolitan markets. In many of the fastest-appreciating markets, average gains are well over 1% per month.

* The average house nationwide has gained 34.8% in resale value since 1996. That means that the condo you bought five years ago for $150,000 would sell for about $202,500 today. A house you bought for $250,000 in 1996 is probably worth about $337,500.

* Five-year gains in dozens of markets are far beyond the national average of 34.8%. For instance, the average home in San Jose, has more than doubled (up a stunning 109.4%) in the last 60 months alone. In Washington, D.C., the average house jumped 14.4% last year, 16.4% on an annualized basis between March and June of this year, and by 49.9% in the last 60 months.

* Long-term gains from buying a house continue to be impressive. In Massachusetts, the average house has more than quadrupled in resale value since 1980, tops in the country. During the same period, homes jumped in value by 283% in the state of New York, and by 200% or more in California, Connecticut, Colorado, Minnesota, Rhode Island and New Jersey, among others.

* Smaller real estate markets are racking up gains that are just as impressive as in some large, metropolitan markets. For instance, Naples, Fla.--already a high-cost resort and retirement area--saw an average 12.2% gain in resale values during the last year. New London, Conn., where local government and industry leaders are pushing hard to reinvigorate a long-stagnant economy, produced an average 10.1% gain in home values.

* Despite signs of a cooling trend in high-appreciation markets where local economic conditions have changed for the worse--for example, San Francisco, Silicon Valley and Austin, Texas--the declines in home market values there have been modest. All of those markets are still in double digits.

* Even at the low end of the housing appreciation scale, where federal researchers typically find hard-hit economic pockets with net declines in home values, the latest study found no market in negative territory. During the early 1990s, by contrast, numerous markets were deflating in value, including entire swaths of Southern California.

What’s keeping the value of homes so high, particularly at a time when every day’s news seems to mention another big corporate layoff, more trouble in the stock market and other portents of recession?

Two factors are particularly important: low mortgage rates and continued healthy income gains for households. By now, every homeowner in the country has heard that “it’s time to refinance--again.” And with rates in the 6.5% to 6.75% range last week, it just may be.

But those same low rates are also enticing hundreds of thousands of people to either buy their first home--pushing up demand and prices at the low end of the homeownership food chain--or to sell the house they’ve got and buy a new, costlier one.

Household income continues to grow nationwide at a rate faster than inflation. And unemployment is steady at 4.5%--a rate that for much of the last two decades would have made even the most dour economists perk up and smile.

So take from the latest federal housing appreciation numbers the positive message they truly convey: Your biggest asset continues to outperform the stock market, inflation, money market funds and bonds. And that should be very good for your personal bottom line indeed.

To see the latest housing price study online, go to https://www.ofheo.gov.