Although strong year-over-year price growth continued in most metropolitan areas in the first quarter, increases were somewhat smaller, according to the latest quarterly report by the National Association of REALTORS®. A companion breakout of income requirements to purchase a median-priced home on a metro basis shows the typical buyer was in a good position to buy an existing home in many cities in the Midwest and South.
The median existing single-family home price increased in 74 percent of measured markets, with 125 out of 170 metropolitan statistical areas (MSAs) showing gains based on closings in the first quarter compared with the first quarter of 2013. Thirty-seven areas, 22 percent, had double-digit increases, and 45 areas recorded lower median prices.
In the fourth quarter of 2013, price increases were recorded in 73 percent of metro areas from a year earlier, with 26 percent rising at double-digit rates, but 89 percent of markets were showing year-over-year gains in the first quarter of 2013.
Lawrence Yun, NAR chief economist, says the price trend is favorable. The cooling rate of price growth is needed to preserve favorable housing affordability conditions in the future, but we still need more new-home construction to fully alleviate the inventory shortages in much of the country, he says. Limited inventory is creating unsustainable and unhealthy price growth in some large markets, notably on the West Coast.²
The national median existing single-family home price was $191,600 in the first quarter, up 8.6 percent from $176,400 in the first quarter of 2013. In the fourth quarter the median price rose 10.1 percent from a year earlier.
The median price is where half of the homes sold for more and half sold for less. Distressed homes2 ¬ foreclosures and short sales generally sold at discount ¬ accounted for 15 percent of first quarter sales, down from 23 percent a year ago.
The five most expensive housing markets in the first quarter were the San Jose, Calif., metro area, where the median existing single-family price was $808,000; San Francisco, $679,800; Honolulu, $672,300; Anaheim-Santa Ana, Calif., $669,800; and San Diego, where the median price was $483,000.
The five lowest-cost metro areas were Youngstown-Warren-Boardman, Ohio, with a median single-family home price of $64,600 in the first quarter; Decatur, Ill., $69,600; Toledo, Ohio, $72,100; Rockford, Ill., $73,100; and Cumberland, Md., at $81,400.
Yun notes many smaller areas had some of the biggest changes in median price from a year ago. Prices in smaller areas tend to be a bit more volatile, with changes in the share of distressed sales affecting comparisons, he says. In such cases, looking at the annual prices for those areas help to put it into perspective.
At the end of the first quarter there were 1.99 million existing homes available for sale, 3.1 percent above the first quarter of 2013, when 1.93 million homes were on the market. The average supply during the quarter was 5.0 months; it was 4.6 months in the first quarter of 2013. A supply of 6 to 7 months represents a rough balance between buyers and sellers.
Total existing-home sales, including single-family and condo, fell 6.9 percent to a seasonally adjusted annual rate of 4.60 million in the first quarter from 4.94 million in the fourth quarter, and were 6.6 percent below the 4.93 million level during the first quarter of 2013. Sales in the Midwest and Northeast were notably impacted by severe winter weather, while limited inventory and reduced affordability affected the West.
According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged 4.36 percent in the first quarter, up from 4.30 percent in the fourth quarter and 3.50 percent in the first quarter of 2013.
NAR President Steve Brown, says there’s been some erosion in housing affordability. Both home prices and mortgage interest rates are higher than a year ago, but the good news is that median income is enough to purchase a home in most areas. There are good potential buying opportunities in areas where there has been consistent local job creation, and where prices have not risen significantly, or where they may be experiencing temporary declines, he says.