Median existing single-family home prices are firming in many metropolitan areas, while improving sales and declining inventory are creating more balanced conditions, according to the latest quarterly report by the National Association of Realtors®.
The median existing single-family home price rose in 74 out of 146 metropolitan statistical areas (MSAs) based on closings in the first quarter from the same quarter in 2011, while 72 areas had price declines. In the fourth quarter of 2011 only 29 areas were showing gains from a year earlier. A new breakout of income requirements on a metro basis shows most buyers have the necessary income to buy a home in their area, assuming a favorable credit rating.
Lawrence Yun, NAR chief economist, says there is some volatility in the price performance. “Home prices are more volatile than normal because of sudden upswings in buyer activity in some localities, and also are affected by the prevalence of distressed sales,” he says. “Home prices lag sales activity because the transactions were negotiated mostly in the previous quarter. Given the steadily dwindling supply of inventory and notably higher listing prices that are being negotiated today, prices are expected to show further improvements in the near future.”
Yun says a big part of the story is housing inventory. “We now have broad shortages of lower priced homes in much of the country, with very tight supply in Western states for homes through the middle price ranges. This is good news for many sellers who wish to list now, or for those waiting for prices to improve.”
At the end of the first quarter there were 2.37 million existing homes available for sale, which is 21.8 percent below the close of the first quarter of 2011 when there were 3.03 million homes on the market. There has been a sustained downtrend since inventories set a record of 4.04 million in the summer of 2007.
The national median existing single-family home price was $158,100 in the first quarter, which is 0.4 percent below $158,700 in the first quarter of 2011. The median is where half sold for more and half sold for less. Distressed homes – foreclosures and short sales which sold at deep discounts – accounted for 32 percent of first quarter sales; they were 38 percent a year ago.
Total existing-home sales, including single-family and condo, increased 4.7 percent to a seasonally adjusted annual rate of 4.57 million in the first quarter from a downwardly revised 4.37 million in the fourth quarter, and were 5.3 percent above the 4.34 million level during the first quarter of 2011 when sales spiked.
“This is the highest first quarter sales pace since 2007,” Yun says. “With strong market fundamentals, total home sales this year should rise 7 to 10 percent.”
NAR President Moe Veissi believes there are more opportunities in today’s market. “Historically favorable housing affordability conditions are making it easier for buyers to enter the market despite the unnecessarily tight credit conditions,” he says. “Housing supply and demand are roughly balanced with overall housing supply at the lowest level in six years, putting sellers on an even footing with buyers in most markets.”
Included with this report is a new breakout on qualifying incomes to purchase a median-priced existing single-family home on a metropolitan area basis, assuming downpayments of 5 percent, 10 percent or 20 percent, and an interest rate of 4 percent with 25 percent of gross income devoted to mortgage principal and interest.
“Qualifying incomes are well below median incomes in most of the country, which means home buyers generally can stay well within their means,” Yun says. “For example, a buyer in Indianapolis making a 10 percent downpayment would need an annual income of $24,000 to purchase a median-priced home, while in Seattle it would be $55,300. For now, buyers are facing an extraordinarily advantageous situation if they can obtain a mortgage.”
The national median family income was $61,000 in the first quarter. However, to purchase a home at the national median price, a buyer making a 5 percent downpayment would only need a $34,700 income. With a 10 percent downpayment the required income would be $32,900, while with 20 percent down, the income drops to $29,300.
First-time buyers purchased 33 percent of homes in the first quarter, unchanged from the fourth quarter; they were 32 percent in the first quarter of 2011.
The share of all-cash home purchases in the first quarter was 32 percent, up from 29 percent in the fourth quarter; they were 33 percent in the first quarter of 2011. Investors, drawn by bargain prices and who make up the bulk of cash purchasers, accounted for 22 percent of all transactions in the first quarter, up from 19 percent in the fourth quarter; they were 21 percent a year ago.
In the condo sector, metro area condominium and cooperative prices—covering changes in 52 metro areas—showed the national median existing-condo price was $157,200 in the first quarter, which is up 3.4 percent from the first quarter of 2011. Eighteen metros showed increases in their median condo price from a year ago and 34 areas had declines.
Regionally, existing-home sales in the Northeast jumped 8.6 percent in the first quarter and are 6.6 percent above the first quarter of 2011. The median existing single-family home price in the Northeast declined 3.2 percent to $226,300 in the first quarter from a year ago.
In the Midwest, existing-home sales rose 5.5 percent in the first quarter and are 11.7 percent higher than a year ago. The median existing single-family home price in the Midwest increased 0.8 percent to $125,300 in the first quarter from the same quarter in 2011.
Existing-home sales in the South increased 2.1 percent in the first quarter and are 4.1 percent above the first quarter in 2011. The median existing single-family home price in the South rose 1.2 percent to $143,600 in the first quarter from a year earlier.
Existing-home sales in the West rose 5.9 percent in the first quarter and are 1.4 percent higher than a year ago. The median existing single-family home price in the West slipped 0.9 percent to $196,200 in the first quarter from the first quarter of 2011.
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