Home-Price Gains Hold Steady in Majority of Metro Areas in Third Quarter
NEW ORLEANS (November 6, 2014) – 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 areas1 (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 sales2, 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 inventory3 continued 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, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, 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.” 4
Distressed homes5 – 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 percentagewise 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 quarter6. To purchase a single-family home at the national median price, a buyer making a 5 percent downpayment would need an income of $48,334, a 10 percent downpayment would require an income of $45,790, and $40,702 would be needed for a 20 percent downpayment.
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.
The five most expensive housing markets in the third quarter were the San Jose, Calif., metro area, where the median existing single-family price was $860,000; San Francisco, $744,400; Anaheim-Santa Ana, Calif., $697,000; Honolulu, $677,600; and San Diego, $517,800.
The five lowest-cost metro areas in the third quarter were Youngstown-Warren-Boardman, Ohio, where the median single-family home price was $84,500; Cumberland, Md., $93,200; Rockford, Ill., $98,100; Decatur, Ill., $101,900; and Toledo, Ohio, $107,000.
Regionally, total existing-home sales in the Northeast rose 7.0 percent in the third quarter but are 5.2 percent below the third quarter of 2013. The median existing single-family home price in the Northeast was $261,700 in the third quarter, up 2.2 percent from a year ago.
In the Midwest, existing-home sales increased 7.4 percent in the third quarter but remain 4.7 percent below a year ago. The median existing single-family home price in the Midwest increased 5.0 percent to $172,700 in the third quarter from the same quarter a year ago.
Existing-home sales in the South climbed 3.6 percent in the third quarter but are 0.8 percent below the third quarter of 2013. The median existing single-family home price in the South was $189,400 in the third quarter, 4.5 percent above a year earlier.
In the West, existing-home sales rose 4.8 percent in the third quarter but remain 7.2 percent below a year ago. The median existing single-family home price in the West jumped 4.9 percent to $302,300 in the third quarter from the third quarter of a year ago.
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.
2The 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.
3Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).
4According to the Realtors® Confidence Index, all-cash sales represented 26 percent of sales during the third quarter of this year; they were 32 percent in the second quarter.
5Distressed sales are from a survey for the Realtors® Confidence Index.
6Income figures are rounded to the nearest hundred, based on NAR modeling of Census data. Qualifying 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 4.1%.
NOTE: Existing-home sales for October will be released November 20, the third quarter Commercial Real Estate Report/Forecast will be released November 24, the Pending Home Sales Index for October will be released November 26; fourth quarter metro area home prices will be released February 11; release times are 10:00 a.m. EST.