Home sales in the Austin market may be down, but the value of local residential real estate continues to rise faster than in most other markets around the country.

A quarterly index report released this week by the Office of Federal Housing Enterprise Oversight shows that Austin-area home prices rose 9.6 percent between September 2006 and September 2007. The report ranks the market No. 7 in the country in terms of year-over-year price appreciation.

The price appreciation comes at the same time Austin is feeling the effects of the credit market crunch. According to the most recent report from the Austin Board of Realtors, total home sales declined 15 percent in October compared with October 2006. Sales year-to-date were down 6 percent. Experts say most of the reduction is coming from the entry-level home market where subprime mortgages have all but dried up.

Three of the top five markets with the highest appreciation were in Utah, according to the OFHEO report. The top five markets in order are: Wenatchee, Wash. (15 percent); Provo-Orem, Utah (14.3 percent); Grand Junction, Colo. (14 percent); Ogden-Clearfield, Utah (13.9 percent); and Salt Lake City, Utah (13.3 percent).

The report also indicates that home prices in Austin have appreciated 28.8 percent in the last five years.

Though the report bodes well for Austin, the national picture is not so rosy. For the first time in nearly 13 years, U.S. home prices experienced a quarterly decline, down 0.4 percent in the third quarter compared with the second quarter of 2007. The annual price change, comparing the third quarter of 2007 to the same period last year, showed an increase of 1.8 percent, the lowest four-quarter increase since 1995.

"While select markets still maintain robust rates of appreciation, our newest data show price weakening in a very significant portion of the country," says James Lockhart, director of OFHEO. "Indeed, in the third quarter, more than 20 states experienced price declines and, in some cases, those declines are substantial."

Austin Business Journal