Home-Price Growth Slows in Many Metro Areas during First Quarter
WASHINGTON (May 12, 2014) – 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 areas1 (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, said 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 said. "Limited inventory is creating unsustainable and unhealthy price growth in some large markets, notably on the West Coast."
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 said. “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,3 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, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, said 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 said.
"Restrictive mortgage credit remains an unnecessary headwind for the housing market, but NAR is also concerned about costly mortgage insurance fees imposed on Federal Housing Administration-backed home loans that have more than doubled since 2010, pricing out as many as 125,000 to 375,000 buyers," Brown added. "When you combine the increases in home prices and interest rates with record-high premiums, home purchases are becoming increasingly out of reach for many qualified borrowers who rely on FHA financing."
Outside of these market headwinds, a separate breakout of qualifying incomes to purchase a median-priced existing single-family home on a metropolitan area basis demonstrates sufficient buying power in the majority of metro areas. Income requirements are determined using several scenarios on downpayment percentages and assume 25 percent of gross income devoted to mortgage principal and interest at a mortgage interest rate of 4.4 percent.
The national median family income4 was $64,500 in the first quarter. However, to purchase a home at the national median price, a buyer making a 5 percent downpayment would need an income of $44,200. With a 10 percent downpayment the required income would be $41,800, while with 20 percent down, the necessary income is only $37,200.
In the condo sector, metro area condominium and cooperative prices – covering changes in 59 metro areas – showed the national median existing-condo price was $191,400 in the first quarter, up 10.8 percent from the first quarter of 2013. Fifty metros showed increases in their median condo price from a year ago, and nine areas had declines.
Regionally, total existing-home sales in the Northeast fell 10.2 percent in the first quarter and are 6.8 percent below the first quarter of 2013. The median existing single-family home price in the Northeast was $239,300 in the first quarter, up 2.2 percent from a year ago.
In the Midwest, existing-home sales dropped 11.5 percent in the first quarter and are 10.5 percent below a year ago. The median existing single-family home price in the Midwest increased 6.7 percent to $144,000 in the first quarter from the same quarter a year ago.
Existing-home sales in the South declined 3.6 percent in the first quarter and are 0.7 percent below the first quarter of 2013. The median existing single-family home price in the South was $168,900 in the first quarter, up 7.7 percent from a year earlier.
In the West, existing-home sales fell 6.0 percent in the first quarter and are 12.4 percent below a year ago. The median existing single-family home price in the West jumped 14.0 percent to $282,100 in the first quarter from the first quarter of 2013.
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 approximately 170 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, based on NAR modeling of Census data.
Second quarter metro area home prices will be released August 12 at 10:00 a.m. EDT.