The lion’s share of metropolitan areas continued to experience strong year-over-year price growth in the fourth quarter, according to the latest quarterly report by the National Association of REALTORS®. A companion metro area annual affordability report shows less favorable conditions, particularly in the West.
The median existing single-family home price increased in 73 percent of measured markets, with 119 out of 164 metropolitan statistical areas (MSAs) showing gains based on closings in the fourth quarter compared with the fourth quarter of 2012. Forty-two areas, 26 percent, had double-digit increases, two were unchanged and 43 recorded lower median prices.
There were fewer rising markets than seen in the third quarter, when price increases were recorded in 88 percent of metro areas from a year earlier, with 33 percent rising at double-digit rates, reflecting a slowdown in price growth.
Lawrence Yun, NAR chief economist, says there are two ways of looking at the price gains.
“The vast majority of homeowners have seen significant gains in equity over the past two years, which is helping the economy through increased consumer spending,” he says. “At the same time, home prices have been rising faster than incomes, while mortgage interest rates are above the record lows of a year ago. This is beginning to hamper housing affordability.”
The five most expensive housing markets in the fourth quarter were the San Jose, Calif., metro area, where the median existing single-family price was $775,000; San Francisco, $682,400; Honolulu, $670,800; Anaheim-Santa Ana, Calif., $666,300; and San Diego, where the median price was $476,800.
The five lowest-cost metro areas were Toledo, Ohio, with a median single-family price of $80,500; Rockford, Ill., $81,400; Cumberland, Md., at $89,500; Elmira, N.Y., $99,500; and South Bend, Ind., with a median price of $101,100.
The national median existing single-family home price was $196,900 in the fourth quarter, up 10.1 percent from $178,900 in the fourth quarter of 2012. In the third quarter the median price rose 12.5 percent from a year earlier.
The median price is where half of the homes sold for more and half sold for less. Distressed homes – foreclosures and short sales generally sold at discount – accounted for 14 percent of fourth quarter sales, down from 24 percent a year ago.
Yun says that tight supplies in many areas accounted for double-digit price growth. At the end of the fourth quarter there were 1.86 million existing homes available for sale, slightly above the fourth quarter of 2012, when 1.83 million homes were on the market. The average supply during the quarter was 4.9 months; it was 4.8 months in the fourth quarter of 2012. A supply of 6.0 to 6.5 months represents a rough balance between buyers and sellers.
Yun adds, “New home construction activity needs to increase significantly in the fast appreciating markets to help relieve upward price pressure.” In 2013, housing starts totaled 924,000, well below the historic average of 1.5 million units that typically are needed.
“Added housing supply will help moderate price growth this year, and should help to stem erosion in affordability, but mortgage interest rates are projected to rise above 5 percent by the end of the year,” Yun says.
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