Home Price Appreciation Picks Up in the Western United States

This deceleration in price growth has been spread across the country, with the western states being the exception. During the height of the housing boom, states that posted some of the highest rates of price growth were coastal, such as California and Florida, as well as speculative, such as Nevada. While prices in these areas were climbing at overheated rates, interior parts of the country were seeing much lower, more stable price growth. As the areas with sharp price increases became too costly for most consumers, people began to look elsewhere for their housing needs, and the areas that had seen much lower price growth appeared to be a bargain for consumers.

Home Price Appreciation
(Year-over-year percent change)

Third-Quarter 2004

Fourth-Quarter 2006

As a result, home demand began to move away from the coastal and speculative markets to neighboring states, where prices were considered to be more affordable. As can be seen in the above maps, the states with the highest appreciation rates have shifted away from the coast and to the interior west. The following table shows how the "hot" states have seen their appreciation rates change in just two years time (from third quarter of 2004 to the fourth quarter of 2006).

The Old and New "Hot" Markets
(Percent change in home prices)

Currently, there is concern over the health of housing markets across the country, as home price growth slows in nearly all states, and some areas showing declines (Michigan was the only state to post a year-over-year decline in fourth-quarter 2006). This shift away from the high-cost markets to those with relatively lower costs may help to keep the national market growing at least slowly for a short time, but the states with cooling price growth will begin to outweigh those showing gains. Therefore, housing prices nationwide will stagnate and possibly post some declines in the near term, before seeing growth return to its historical trend.

by Jeannine Cataldi