The Office of Federal Housing Enterprise Oversight (OFHEO) have reported a home price inflation rate of 12.97-percent, the highest annual increase in 25 years, in a federal study. The 12.97-percent was evaluated from the third quarter of 2004, and compared to the third quarter of 2003. To put this in perspective, as recently as 1998, 4 percent was the average annual appreciation rate for the U.S. as a whole.

OFHEO's tabulated these numbers from their extensive database that comprises over 28.8 million repeat sales and refinancings on existing single-family properties all 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.

Most economists had predicted a steady slowing of appreciation rates for 2004 after an excellent year in 2003. However, home values have instead accelerated. 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.

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.

According to the OFHEO, home values rose highest in Nevada (35.78 percent), Hawaii (28.29 percent), California (27.18 percent), Washington DC (23.95 percent), Rhode Island (22.54 percent), and Maryland (22.32 percent). Not surprisingly, some cities within these states had extraordinary resale values. Homes in the Las Vegas-Paradise market gained a whopping 41.74 percent in resale value over the last 12 months, followed by Riverside-San Bernadino, CA (33.81 percent), Reno, NV (31.9 percent), Los Angeles, CA (30.47 percent), San Diego, CA (30.42 percent). In fact, 11 of the top 20 appreciating markets were in California.

An additional thirteen states had annual appreciation rates higher than the average. No states in the latest study experienced a decrease in home values during the preceding 12 months. The hottest markets outside of California and Nevada were along the East Coast primarily in Florida, Virginia, Maryland, and the coast of New Jersey.

OFHEO chief economist Patrick Lawler attributed the appreciation rate spurt to two possible factors - (1)Continued low mortgage rates that has hovered just above 40-year lows for much of 2004; and (2)Undervaluation of appraisals for many refinanced properties over the past few years may have contributed tp a spike in reported prices of houses when they are resold and appraised for new homebuyers.

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