Wednesday, October 29, 2014
PLACERVILLE, CALIFORNIA
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Metro areas see solid home-price growth

By
From page HS6 | February 14, 2014 |

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The median existing single-family home price increased in 73 percent of measured markets, with 119 out of 164 metropolitan statistical areas 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, said 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 said. “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 metro area, where the median existing single-family price was $775,000; San Francisco, $682,400; Honolulu, $670,800; Anaheim-Santa Ana, $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, NY, $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 said 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 added, “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 said.

Total existing-home sales, including single-family and condo, fell 7.8 percent to a seasonally adjusted annual rate of 4.94 million in the fourth quarter from 5.36 million in the third quarter, but were 0.8 percent above the 4.90 million level during the fourth quarter of 2012.

According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged 4.30 percent in the fourth quarter, down from 4.44 percent in the third quarter; it was a record low 3.36 percent in the fourth quarter of 2012, with records dating back to 1971.

NAR President Steve Brown, co-owner of Irongate, Inc., Realtors in Dayton, Ohio, said consumers need to keep in mind that all real estate is local. “The national figures provide useful background, but it really gets down to supply and demand in a given neighborhood,” he said. “Metropolitan area figures are an excellent gauge of local housing markets, but there can be widely ranging conditions within a metro area. This is why it’s best to consult with a Realtor, who has additional resources and can provide much greater detail on specific locations.”

NAR’s national annual Housing Affordability Index, with breakouts for metropolitan areas, fell to 175.8 in 2013 from a record high 196.5 in 2012. For first-time buyers making small downpayments, the affordability levels are relatively lower. The index is calculated on the relationship between median home price, median family income and average effective mortgage interest rate. The higher the index, the stronger household purchasing power; recordkeeping began in 1970.

An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent downpayment and 25 percent of gross income devoted to mortgage principal and interest payments.

Metro areas with the greatest housing affordability conditions in 2013 include Toledo, Ohio, with an index of 395.4; Rockford, Ill., at 374.5; Decatur, Ill., 343.7; Lansing-East Lansing, Mich., 331.4; and Springfield, Ill., at 327.8.

In the condo sector, metro area condominium and cooperative prices – covering changes in 55 metro areas — showed the national median existing-condo price was $197,200 in the fourth quarter, up 10.7 percent from the fourth quarter of 2012. Forty-four metros showed increases in their median condo price from a year ago, one was unchanged and 10 areas had declines.

Regionally, total existing-home sales in the Northeast declined 7.1 percent in the fourth quarter, but are 7.1 percent above the fourth quarter of 2012. The median existing single-family home price in the Northeast was $241,000 in the fourth quarter, up 5.5 percent from a year ago.

In the Midwest, existing-home sales fell 9.1 percent in the fourth quarter, but are 2.0 percent higher than a year ago. The median existing single-family home price in the Midwest increased 7.0 percent to $152,400 in the fourth quarter from the same quarter a year ago.

Existing-home sales in the South declined 4.4 percent in the fourth quarter, but are 3.6 percent above the fourth quarter of 2012. The median existing single-family home price in the South was $173,000 in the fourth quarter, up 8.3 percent from a year earlier.

In the West, existing-home sales dropped 12.7 percent in the fourth quarter, and are 8.1 percent below a year ago. With notable inventory restrictions, the median existing single-family home price in the West jumped 15.5 percent to $286,200 in the fourth quarter from the fourth quarter of 2012.

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