Most Metro Areas Show Strong Annual Home-Price Growth
WASHINGTON (November 6, 2013) – The majority of metropolitan areas in the third quarter experienced robust year-over-year price gains, with the national median price showing the strongest annual growth in nearly eight years, according to the latest quarterly report by the National Association of Realtors®.
The median existing single-family home price increased in 88 percent of measured markets, with 144 out of 163 metropolitan statistical areas1 (MSAs) showing gains based on closings in the third quarter compared with the third quarter of 2012. Fifty-four areas, 33 percent, had double-digit increases, while 19 had price declines.
In the second quarter, price gains were recorded in 87 percent of metro areas from a year earlier, while in the third quarter of last year, 81 percent of available areas showed annual increases, but only 18 percent of markets rose by double-digit amounts.
Lawrence Yun, NAR chief economist, said market momentum is changing. “Rising prices and higher interest rates have taken a bite out of housing affordability,” he said. “However, we have the ongoing situation of more buyers than sellers in the market, so lower sales will help to take the pressure off home price growth and allow them to rise slowly at a single-digit growth rate in 2014.”
Even with the erosion in affordability, a companion breakout in this report on income requirements to buy a median-priced home on a metro area basis shows most buyers can afford a home, but less so in pricier areas.
The five most expensive housing markets were the San Jose, Calif., metro area, where the median existing single-family price was $805,000; San Francisco, $705,000; Honolulu, $679,800; Anaheim-Santa Ana, Calif., $670,700; and San Diego, where the median price was $485,000.
The five most affordable metro areas were Toledo, Ohio, with a median single-family price of $87,500; Rockford, Ill., at $88,900; Decatur, Ill., $91,000; Ocala Fla., $103,600; and Topeka, Kan., with a median price of $106,900.
The national median existing single-family home price was $207,300 in the third quarter, up 12.5 percent from $184,300 in the second third of 2012, which is the strongest year-over-year increase since the fourth quarter of 2005 when it jumped 13.6 percent. In the second quarter the median price rose 12.2 percent from a year earlier.
The median price is where half of the homes sold for more and half sold for less. A smaller market share of lower priced homes accounts for some of the price growth. Distressed homes2 – foreclosures and short sales generally sold at discount – accounted for 14 percent of third quarter sales, down from 24 percent a year ago.
At the end of the third quarter there were 2.21 million existing homes available for sale, modestly higher than the third quarter of 2012, when 2.17 million homes were on the market. However, with higher sales, the average supply during the quarter was 5.0 months, down from 5.9 months in the third quarter of 2012.
Total existing-home sales,3 including single-family and condo, rose 5.9 percent to a seasonally adjusted annual rate of 5.36 million in the third quarter from 5.06 million in the second quarter, and were 13.0 percent above the 4.74 million level during the third quarter of 2012. Sales were at the highest pace since the first quarter of 2007, when they reached 5.66 million.
According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged 4.44 percent in the third quarter, up from 3.69 percent in the second quarter and 3.54 percent in the third quarter of 2012; the commitment rate is at the highest level since the second quarter of 2011 when it averaged 4.66 percent.
NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., said continued access to safe, affordable financing is critical. “NAR firmly believes that hardworking, creditworthy consumers should be able to achieve their dreams of owning a home,” he said. “As legislators and regulators consider reforms to the secondary mortgage market, they must ensure that mortgage capital is available under all economic conditions so that qualified homebuyers have access to safe, affordable loan products.”
A separate breakout of qualifying incomes to purchase a median-priced existing single-family home on a metropolitan area basis generally shows potential buyers had adequate income in most areas to purchase in the third quarter. Income requirements are determined using several scenarios on downpayment percentages, which assume 25 percent of gross income is devoted to mortgage principal and interest, with a mortgage interest rate of 4.4 percent.
The national median family income4 of $63,800 would readily qualify a buyer to purchase a median-priced home in the third quarter. However, to purchase a home at the national median price, a buyer making a 5 percent downpayment would only need an income of $47,800. With a 10 percent downpayment the required income would be $45,300, while with 20 percent down, the necessary income is $40,200.
In the condo sector, metro area condominium and cooperative prices – covering changes in 55 metro areas – showed the national median existing-condo price was $205,400 in the third quarter, up 15.1 percent from the third quarter of 2012. Forty-nine metros showed increases in their median condo price from a year ago and six areas had declines.
Regionally, total existing-home sales in the Northeast jumped 10.5 percent in the third quarter, and are 15.9 percent above the third of 2012. The median existing single-family home price in the Northeast was $256,800 in the third quarter, up 4.5 percent to from a year ago.
In the Midwest, existing-home sales rose 8.8 percent in the third quarter, and are 17.4 percent higher than a year ago. The median existing single-family home price in the Midwest increased 8.9 percent to $164,700 in the third quarter from the same quarter last year.
Existing-home sales in the South increased 4.3 percent in the third quarter, and are 12.2 percent above the third quarter of 2012. The median existing single-family home price in the South was $181,300 in the third quarter, up 12.2 percent from a year earlier.
In the West, existing-home sales rose 3.6 percent in the third quarter, and are 8.6 percent above a year ago. With ongoing regional inventory shortages, the median existing single-family home price in the West surged 17 percent to $289,100 in the third quarter from the third quarter of 2012.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
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NOTE: NAR releases quarterly median single-family price data for over 160 Metropolitan Statistical Areas (MSAs). In some cases the MSA prices may not coincide with data released by state and local Realtor® associations. Any discrepancy may be due to differences in geographic coverage, product mix, and timing. In the event of discrepancies, Realtors® are advised that for business purposes, local data from their association may be more relevant.
Data tables for MSA home prices (single family and condo) are posted at http://www.nar.realtor/topics/metropolitan-median-area-prices-and-afford.... If insufficient data is reported for a MSA in particular quarter, it is listed as N/A. For areas not covered in the tables, please contact the local association of Realtors®.
1Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. NAR adheres to the OMB definitions, although in some areas an exact match is not possible from the available data. A list of counties included in MSA definitions is available at: http://www.census.gov/population/estimates/metro-city/List4.txt.
Regional median home prices are from a separate sampling that includes rural areas and portions of some smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.
Median price measurement reflects the types of homes that are selling during the quarter and can be skewed at times by changes in the sales mix. For example, changes in the level of distressed sales, which are heavily discounted, can vary notably in given markets and may affect percentage comparisons. Annual price measures generally smooth out any quarterly swings.
NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series dates back to 1989.
Because there is a concentration of condos in high-cost metro areas, the national median condo price often is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional areas will be included in the condo price report.
2Distressed sales are from a survey for the Realtors® Confidence Index.
3The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing.
Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.
4Income figures are rounded to the nearest hundred.
Fourth quarter and 2013 annual metro area home prices, and quarterly existing-home sales, will be released February 11 at 10:00 a.m. EST.