WASHINGTON (February 10, 2016) — A moderating pace of sales had little impact on the trajectory of home prices during the final three months of the year, which picked up speed and showed continued growth in most of the U.S., according to the latest quarterly report by the National Association of Realtors®.
The median existing single-family home price increased in 81 percent of measured markets, with 145 out of 1791 metropolitan statistical areas2 (MSAs) showing gains based on closings in the fourth quarter compared with the fourth quarter of 2014. Thirty-four areas (19 percent) recorded lower median prices from a year earlier.
There were slightly fewer rising markets in the fourth quarter compared to the third quarter, when price gains were recorded in 87 percent of metro areas. Thirty metro areas in the fourth quarter (17 percent) experienced double-digit increases, a jump from the 20 metro areas in the third quarter. Twenty-two metro areas (12 percent) experienced double-digit increases in the fourth quarter of 2014.
For all of 2015, an average of 89 percent of measured metro areas saw increasing home prices, up from the averages in 2014 (83 percent) and 2013 (88 percent).
Lawrence Yun, NAR chief economist, says faster price growth reawakened in the final months of 2015 despite the pace of sales slowing from earlier in the year. "Even with slightly cooling demand, the unshakeable trend of inadequate supply in relation to the overall pool of prospective buyers inflicted upward pressure on home prices in several metro areas," he said. "As a result, homeownership continues to be out of reach for a number of qualified buyers in the top job producing, but costliest, parts of the country – especially on the West Coast and parts of the South."
The national median existing single-family home price in the fourth quarter was $222,700, up 6.9 percent from the fourth quarter of 2014 ($208,400). The median price during the third quarter of 2015 increased 5.4 percent from the third quarter of 2014.
Total existing-home sales3, including single family and condo, declined 5.4 percent to a seasonally adjusted annual rate of 5.18 million in the fourth quarter from 5.48 million in the third quarter, but are 2.4 percent higher than the 5.06 million pace during the fourth quarter of 2014.
"Without a significant ramp-up in new home construction and more homeowners listing their homes for sale, buyers are likely to see little relief in the form of slowing price growth in the months ahead," adds Yun.
Rising home prices, despite lower mortgage rates and an increase in the national family median income ($68,034)4, caused affordability to fall in the fourth quarter compared to the fourth quarter of last year. To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $49,535, a 10 percent down payment would require an income of $46,928, and $41,714 would be needed for a 20 percent down payment.
"Recent employment data is starting to show some pick-up in wage growth as the labor market edges near full employment," adds Yun. "With price appreciation likely to continue at the same pace – and even higher in some markets – incomes need to rise even more to keep affordability conditions from declining further."
The five most expensive housing markets in the fourth quarter were the San Jose, Calif., metro area, where the median existing single-family price was $940,000; San Francisco, $781,600; Honolulu, $716,600; Anaheim-Santa Ana, Calif., $708,700; and San Diego, $546,800.
The five lowest-cost metro areas in the fourth quarter were Youngstown-Warren-Boardman, Ohio, $81,200; Cumberland, Md., $86,100; Rockford, Ill., $87,600; Decatur, Ill., $90,000; and Wichita Falls, Texas, $101,900.
Metro area condominium and cooperative prices – covering changes in 61 metro areas – showed the national median existing-condo price was $209,200 in the fourth quarter, up 3.6 percent from the fourth quarter of 2014 ($202,000). Forty-four metro areas (72 percent) showed gains in their median condo price from a year ago; 17 areas had declines.
At the end of the fourth quarter, there were 1.79 million existing homes available for sale5, which was below the 1.86 million homes for sale at the end of the fourth quarter in 2014. The average supply during the fourth quarter was 4.6 months – down from 4.9 months a year ago.
NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida, says the main challenge for buyers so far in 2016 continues to be insufficient supply. "With the exception of some metro areas with jobs heavily reliant in the energy sector, Realtors® say demand has held steady during the winter months," he said. "Serious buyers should be prepared to act fast, and remain in close communication with a Realtor® to deploy a negotiation strategy that fits their budget. Even in these typically slower winter months, listings in affordable price ranges are going under contract quickly."
Total existing-home sales in the Northeast increased 1.9 percent in the fourth quarter and are 7.3 percent above the fourth quarter of 2014. The median existing single-family home price in the Northeast was $254,500 in the fourth quarter, up 3.7 percent from a year ago.
In the Midwest, existing-home sales decreased 6.9 percent in the fourth quarter but are 5.2 percent higher than a year ago. The median existing single-family home price in the Midwest increased 6.0 percent to $171,600 in the fourth quarter from the same quarter a year ago.
Existing-home sales in the South declined 4.1 percent in the fourth quarter and are 0.6 percent below the fourth quarter of 2014. The median existing single-family home price in the South was $195,400 in the fourth quarter, 6.6 percent above a year earlier.
In the West, existing-home sales fell 10.4 percent in the fourth quarter but are 2.1 percent above a year ago. The median existing single-family home price in the West increased 8.4 percent to $323,600 in the fourth quarter from the fourth quarter of 2014.
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association, representing over 1.1 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 https://www.nar.realtor/topics/metropolitan-median-area-prices-and-affordability. 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®.
1The Wichita Falls, TX MSA will now be included in the single-family price report.
2Areas 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.
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. 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 4.0%.
5Total 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).
NOTE: Existing-Home Sales for January will be released February 23, and the Pending Home Sales Index for January will be released February 29; release times are 10:00 a.m. ET.