The encouraging lift-off in existing-home sales amidst ongoing inventory shortages kept home prices rising in most of the country during the third quarter, but overall price appreciation slowed to a healthier pace, according to the latest quarterly report by the National Association of Realtors®.
The median existing single-family home price increased in 87 percent of measured markets, with 154 out of 178 metropolitan statistical areas1 (MSAs) showing gains based on closings in the third quarter compared with the third quarter of 2014. Twenty-four areas (13 percent) recorded lower median prices from a year earlier.
There were slightly fewer rising markets in the third quarter compared to the second quarter, when price gains were recorded in 93 percent of metro areas. Twenty-one metro areas in the third quarter (12 percent) experienced double-digit increases, a decline from the 34 metro areas in the second quarter. Sixteen metro areas (9 percent) experienced double-digit increases in the third quarter of 2014.
Lawrence Yun, NAR chief economist, says there’s no question the housing market had its best quarter in nearly a decade. “The demand for buying picked up speed in many metro areas during the summer as more households entered the market, encouraged by favorable mortgage rates and improving local economies,” he said. “While price growth still teetered near or above unhealthy levels in some markets, the good news is that there was some moderation despite the stronger pace of sales.”
The national median existing single-family home price in the third quarter was $229,000, up 5.5 percent from the third quarter of 2014 ($217,100). The median price during the second quarter of this year increased 8.2 percent from a year earlier.
Total existing-home sales2, including single family and condo, increased 3.4 percent to a seasonally adjusted annual rate of 5.48 million in the third quarter from 5.30 million in the second quarter, and are 8.3 percent higher than the 5.06 million pace during the third quarter of 2014.
Yun says sales had the potential to be even higher last quarter given the decline in mortgage rates and favorable economic conditions. “Unfortunately, the lack of any meaningful gains in housing supply pushed prices in some areas above what some potential buyers – especially first-time buyers – are able to afford.”
The five most expensive housing markets in the third quarter were the San Jose, Calif., metro area, where the median existing single-family price was $965,000; San Francisco, $809,400; Anaheim–Santa Ana, Calif., $715,300; Honolulu, $714,000; and San Diego, $554,400.
The five lowest-cost metro areas in the third quarter were Cumberland, Md., where the median single-family home price was $82,400; Youngstown–Warren–Boardman, Ohio, $90,700; Decatur, Ill., $101,400; Rockford, Ill., $102,800; and Elmira, N.Y., $108,800.
“Many of the metro areas with the fastest price appreciation over the past year were in the South – particularly in Florida,” says Yun. “A combination of solid job gains, above average shares of vacation and foreign buyers and little new construction being added was behind these areas’ faster price growth.”
Metro area condominium and cooperative prices – covering changes in 62 metro areas – showed the national median existing-condo price was $215,200 in the third quarter, up 2.0 percent from the third quarter of 2014 ($211,000). Forty-four metro areas (71 percent) showed gains in their median condo price from a year ago; 18 areas had declines.
At the end of the third quarter, there were 2.21 million existing homes available for sale3, which is below the 2.28 million homes for sale at the end of the third quarter in 2014. The average supply during the third quarter was 4.9 months – down from 5.5 months a year ago.
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says the overall pool of potential buyers still outweighs what’s available for sale in several markets this fall. “Realtors® are still reporting that many homes are going under contract more quickly than what’s typical this time of year,” he said. “While this is certainly beneficial to homeowners looking to sell, some are still reluctant to list out of concerns they’ll have limited time and choices during their own home search.”
Rising home prices, despite an increase in the national family median income ($67,723)4, slightly decreased affordability in the third quarter compared to the third quarter of last year. To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $50,324, a 10 percent down payment would require an income of $47,675, and $42,378 would be needed for a 20 percent down payment.
Regional Breakdown
Total existing-home sales in the Northeast jumped 6.4 percent in the third quarter and are 9.1 percent above the third quarter of 2014. The median existing single-family home price in the Northeast was $269,400 in the third quarter, up 3.5 percent from a year ago.
In the Midwest, existing-home sales rose 2.1 percent in the third quarter and are 9.0 percent higher than a year ago. The median existing single-family home price in the Midwest increased 4.8 percent to $181,100 in the third quarter from the same quarter a year ago.
Existing-home sales in the South climbed 3.0 percent in the third quarter and are 6.9 percent above the third quarter of 2014. The median existing single-family home price in the South was $200,700 in the third quarter, 6.0 percent above a year earlier.
In the West, existing-home sales increased 3.9 percent in the third quarter and are 9.7 percent above a year ago. The median existing single-family home price in the West increased 7.3 percent to $324,300 in the third quarter from the third quarter of 2014.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing over 1.1 million members involved in all aspects of the residential and commercial real estate industries.
NOTE: NAR releases quarterly median single-family price data for approximately 170 Metropolitan Statistical Areas (MSAs). In some cases the MSA prices may not coincide with data released by state and local Realtor® associations. Any discrepancy may be due to differences in geographic coverage, product mix, and timing. In the event of discrepancies, Realtors® are advised that for business purposes, local data from their association may be more relevant.
Data tables for MSA home prices (single family and condo) are posted at http://www.realtor.org/topics/metropolitan-median-area-prices-and-affordability/data. If insufficient data is reported for a MSA in particular quarter, it is listed as N/A. For areas not covered in the tables, please contact the local association of Realtors®.
1Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. NAR adheres to the OMB definitions, although in some areas an exact match is not possible from the available data. A list of counties included in MSA definitions is available at: http://www.census.gov/population/estimates/metro-city/List4.txt.
Regional median home prices are from a separate sampling that includes rural areas and portions of some smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.
Median price measurement reflects the types of homes that are selling during the quarter and can be skewed at times by changes in the sales mix. For example, changes in the level of distressed sales, which are heavily discounted, can vary notably in given markets and may affect percentage comparisons. Annual price measures generally smooth out any quarterly swings.
NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series dates back to 1989.
Because there is a concentration of condos in high-cost metro areas, the national median condo price often is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional areas will be included in the condo price report.
2The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing.
Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.
3Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).
4Income figures are rounded to the nearest hundred, based on NAR modeling of Census data. Qualifying income requirements are determined using several scenarios on downpayment percentages and assume 25 percent of gross income devoted to mortgage principal and interest at a mortgage interest rate of 4.0%.
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