Home prices showed continued growth in a majority of metropolitan areas in the third quarter, but all four major regions saw increases at or below 5 percent from a year ago, according to the latest quarterly report by the National Association of REALTORS®.
The median existing single-family home price increased in 73 percent of measured markets, with 125 out of 172 metropolitan statistical areas (MSAs) showing gains based on closings in the third quarter compared with the third quarter of 2013. Forty-seven areas (27 percent) recorded lower median prices from a year earlier.
The number of rising markets in the third quarter was mostly unchanged from the second quarter, when price increases were recorded in 71 percent of metro areas. Sixteen areas in the third quarter (9 percent) had double-digit increases, a sharp decline from the 54 areas (33 percent) in the third quarter of 2013. Nineteen areas experienced increases in the double-digits in the second quarter of this year.
Lawrence Yun, NAR chief economist, says home prices in the third quarter continued to stabilize towards a healthier rate of growth. “Home-price gains returned to more normalized levels of low- to mid-single digit rate of appreciation in many metro markets as inventory levels steadily increased,” he said. “Moreover, there are a good number of local markets that are still remarkably affordable with median prices at or under $200,000.”
The national median existing single-family home price in the third quarter was $217,300, up 4.9 percent from the third quarter of 2013 ($207,100). The median price during the second quarter of 2014 increased 4.2 percent from a year earlier.
Total existing-home sales, including single family and condo, increased 5.2 percent to a seasonally adjusted annual rate of 5.12 million in the third quarter from 4.87 million in the second quarter, but are still 3.8 percent below the 5.32 million pace during the third quarter of 2013.
Yun adds, “Given the improving labor market and historically low interest rates, more buyers are anticipated to enter the market next year.”
Total housing inventorycontinued to make strides at the end of the third quarter at 2.30 million existing homes available for sale, which is 6.0 percent higher than a year ago. The average supply during the third quarter was 5.4 months; it was 5.0 months in the third quarter of 2013. A supply of 6 to 7 months represents a rough balance between buyers and sellers.
NAR President Steve Brown, says traditional buyers are entering a more favorable market. “With inventory levels at a rate closer to supporting overall demand, bidding wars are occurring less – giving buyers more time to view homes and secure financing,” he said. “Additionally, REALTORS® across the country continue to report less investor activity and fewer all-cash sales in their markets compared to earlier in the year.”
Distressed homes – foreclosures and short sales generally sold at discount – accounted for 9 percent of third quarter sales, down from 14 percent a year ago. “Distressed sales are becoming less prevalent in many parts of the country and will likely be in the low single-digits percentage-wise at this time next year,” adds Yun.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage held steady during the third quarter to an overall average rate of 4.14 percent, down from 4.23 percent during the second quarter of the year. They were 4.4 percent in the third quarter of 2013.
Slightly lower mortgage rates and an uptick in the national family median income ($65,562) kept affordability in the third quarter roughly in line with the second quarter. To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $48,334, a 10 percent down payment would require an income of $45,790, and $40,702 would be needed for a 20 percent down payment.
Metro area condominium and cooperative prices – covering changes in 61 metro areas – showed the national median existing-condo price was $211,000 in the third quarter, up 2.7 percent from the third quarter of 2013 ($205,500). Forty-one metro areas (67 percent) showed increases in their median condo price from a year ago; 20 areas had declines.