The state’s housing market could be at a turning point after a Federal Deposit Insurance Corp. study showed that home appreciation in Connecticut, for the first time since 2000, rose at a slower pace in the third quarter of 2005 than the national rate of appreciation.

“Some things are changing in the housing market,” said Paul Driscoll, the Boston-based New England regional manager of the FDIC’s Division of Insurance and Research.

But it is too early to tell if the state’s slowdown in appreciation – which was at a 14.2 percent increase in the second quarter of 2005 and slowed to an increase of 10.6 percent in the third quarter – truly signals a turning point in the housing market, Driscoll said. He stressed that home prices are still rising at a strong rate, so the fact that Connecticut’s rate of appreciation dropped below the national rate during one quarter might not be indicative of a big change in the market.

“These are very strong appreciation rates,” he said.

But the double-digit appreciation rates will eventually end, Driscoll added.

“Those rates can’t continue forever,” he noted.

Mortgage rates remain low, but incomes are not rising at the same level as home appreciation, so eventually the housing market will have to cool. Although mortgage rates remain low, they are rising. That could reduce demand for new housing and refinancing activity, according to the FDIC, which has indicated that as of November, the one-year adjustable rate averaged one of the highest rates in four years at 5.43 percent, and the 30-year fixed rate averaged a three-year high of 6.28 percent.

The market is always cyclical, Driscoll noted, but is still very healthy. This is the first quarter since 2003 that saw appreciation drop.

“Nobody’s lost money in housing yet,” Driscoll said.

Sales of existing homes in the state, both single-family and condominiums, reached a record level in the third quarter, according to the FDIC’s report.

‘In Good Shape’

Energy costs, which have gone up since the hurricanes that pummeled Florida and the Gulf Coast last year, were another focus of the FDIC’s study.

Consumers across the country spent a median of 5 percent of their disposable income on energy this year, the FDIC estimated. That is up from 3.5 percent in 2001, according to Driscoll. But in Connecticut last year, figures likely will show, consumers spent up to 5.9 percent of their disposable income on energy. According to the report, the cost of energy is relatively more expensive in Connecticut because there are fewer indigenous energy resources to replace the supplies that were disrupted by the hurricanes.

Energy costs in Connecticut are expected to average about one-fifth higher in 2005 than in 2004 and to rise further in 2006. The impact on lower-income households will be even greater, Driscoll predicted.

“There’s an increase there,” he said. “People will have to make decisions about spending their disposable income.”

Nationwide, prices of all energy products rose quickly last year when the hurricanes disrupted supplies of crude oil and natural gas across the United States. Nationally, retail prices of heating oil for calendar 2005 are expected to average almost one-third more than a year earlier, and 2006 prices are expected to increase by an additional 10 percent.

The increased costs are affecting the economy, which is already growing slowly, according to the FDIC. Over the four consecutive quarters ending in the third quarter of 2005, payroll employment in Connecticut grew by 1.1 percent, which was also the New England average. Over the same period, the national rate was 1.7 percent.

The report also noted the health of Connecticut’s banking industry. Any problems the economy is experiencing, such as slow job growth in Connecticut, have not yet reached the banks, Driscoll said, because it takes a year or two for decisions to cycle through and affect results.

The overall economy is healthy and banks are doing well.

“The industry is in good shape, reflecting the economy, which is in good shape,” Driscoll said.

The FDIC report found that branch growth for Connecticut banks continues at a lower level than national and regional growth rates, with growth over the past few years at about half that of the nation. Since 2000, total branch growth has been 1.2 percent, while population growth has been 3.2 percent. Comparisons over a longer time frame show an even wider divergence. Consequently, population per branch in the state has increased by 6.8 percent over the past decade, in contrast to declines of 2.1 percent for the nation and 0.7 percent for New England, according to the report. The existing branch network serves a larger population base and is gaining in efficiency with automated teller networks and online banking systems meeting the needs of larger numbers of customers.

Net-interest margins at the state’s insured institutions have experienced pressure since the mid-1990s, but the state’s community banks reported increasing net-interest margins – the dollar difference between interest income and interest expenses – in the last year as asset yields increased faster than funding costs. The improvement had a positive impact on bottom-line earnings as the median return on assets continued a series of small quarterly increases to 0.70 percent in the third quarter of 2005.

Connecticut’s large banks posted sizeable gains late in 2004 as asset yields increased sharply, but experienced a decline in net-interest margins in the second and third quarters of last year as funding costs began to increase. However, earnings at those institutions remained favorable. Return on assets in the third quarter of 2005 declined 6 basis points from the second quarter of last year to 1.17 percent.