US house prices are starting to feel the effects of the upward trend in mortgage rates, lender Freddie Mac has reported. Its latest quarterly national Conventional Mortgage Home Price Index showed a 8.7 per cent increase on a year ago (although this was down from the 12.9 per cent in the fourth quarter of 2005).

In index showed the 30 year fixed mortgage rate climbing from an average 6.15 per cent in January to 6.32 per cent in March.

'We have seen a lot of mixed news with respect to the housing market in the past few months’, said Freddie Mac vice president and chief economist Frank Nothaft. ‘Construction employment, which had been one of the reliable growth sectors, was relatively flat throughout the first quarter. But a gradual and orderly slowing of the housing market has been anticipated for some time now as we come off of record high sales and single family home construction.

‘We anticipate about a 7 per cent decline in home sales this year and a transition from a sellers market to a buyers market.

'The first quarter of 2006 marks the third consecutive quarter of moderation in home value growth. We are expecting about half of the increase that we saw in the national average home value appreciation in 2005 for 2006, which puts annual home price growth between 6 and 8 percent, depending on how fast interest rates rise over the remainder of the year. This would still be above the long term average growth rate and reflects a still vibrant but normalising housing market at the national level’.

• The US housing boom has ended but sales will continue at historically healthy levels with price appreciation returning to ‘normal patterns’ across much of the country, the National Association of Realtors has announced.

'In recent years we were occasionally challenged to find appropriate superlatives to describe surprisingly high home sales. Now the housing market has cooled, but 2006 is still expected to be the third strongest on record’, said NAR’s chief economist, David Lereah.

A slowing down from a hot market is ‘a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long term affordability’, said Lereah. ‘But this is a time for the Fed to pause on rate hikes because we have some interest sensitive housing markets that have become vulnerable’.

NAR predicts existing home sales will drop 6.8 per cent to 6.6m this year while new home sales will fall 13.4 per cent to 1.1m. Housing starts are likely to decline 6.2 per cent to 1.9m.

Meanwhile the national median existing home price for all housing types is forecast to rise 5.3 per cent this year to £125,400. With more construction in 2006 taking place in lower cost housing markets, the median new home price is projected to increase just 0.8 per cent to £131,700.

• US home prices were 12.5 per cent higher in the first quarter of 2006 than one year earlier, the Office of Federal Housing Enterprise Oversight has reported. However, the rate of house price growth is declining with appreciation during the quarter put at 2.0 per cent, about a third down on the previous quarter and the lowest since the first quarter of 2004.

'Average housing prices are still growing more strongly than some might have expected’, said OFHEO Acting Director James Lockhart. ‘They do indicate, however, that price growth is moderating in some parts of the country, particularly in areas where prices have been rising the most’.

Arizona showed the greatest appreciation rate, although price growth had almost halved. Rapid price rises continued Florida while rises also continued in some areas affected by Hurricane Katrina.

• The typical million dollar US homeowner likes to live well, but is not living an ultra lavish lifestyle, Caldwell Banker Real Estate Corporation has discovered. Million dollar homeowners live in homes complete with entertainment rooms, designer kitchens and wine cellars, according to the firm’s Previews International. They are typically younger Baby Boomers who work for a corporation, and many have a household income of less than £270,000.

'We did not find huge numbers of these consumers having amenities like heated floors (14 per cent), tennis courts (4 per cent), or backyard putting greens (5 per cent)’, said CB president Jim Gillespie president and CEO, Coldwell Banker Real Estate Corporation
More than a third of those surveyed owned second homes. Another 35 per cent said they were considering buying an investment property, and/or a secondy residence for family use.

'What that tells us is that they understand that real estate remains a solid, long-term investment, and one that they can enjoy’, said Gillespie.

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