Home prices show huge slowdown

Figures indicate market cooling

September 06, 2006|Associated Press

WASHINGTON -- US home prices continued to rise in the second quarter but showed the biggest slowdown in three decades, federal regulators reported .

The figures released yesterday by the Office of Federal Housing Enterprise Oversight, the agency that oversees the big mortgage-finance companies Fannie Mae and Freddie Mac, provided the latest indication that the housing market is cooling substantially.

Average home prices rose 1.17 percent in the April-June period, compared with 3.65 percent in the second quarter of 2005 -- the biggest decline in price growth since the agency started keeping track of home prices in 1975, the new report showed. The agency cited higher interest rates and rising inventories of homes for sale as possible factors in the slowdown .

``These data are a strong indication that the housing market is cooling in a very significant way," said James B. Lockhart, the agency's director .

Data issued last month provided proof that the housing boom is over. The Commerce Department reported that sales of new homes dropped in July by 4.3 percent, the largest amount since February, while the inventory of unsold homes climbed to a record . And sales of previously owned homes fell 4.1 percent in July to a 2.5-year low, according to the National Association of Realtors. Analysts expect home sales to drop by some 10 percent this year.

The OFHEO report noted house prices grew faster from the second quarter of 2005 to the same period this year than prices of other goods and services, which rose 4.41 percent. In New England, the year-to-year rate dropped to 5.68 percent from 8.71 percent.