WASHINGTON (May 11, 2015)—Stronger demand amidst lagging inventory levels caused home prices to accelerate in many metro areas during the first quarter of 2015, and the number of areas experiencing double-digit price appreciation doubled compared to last quarter, according to the latest quarterly report by the National Association of Realtors®.
The median existing single-family home price increased in 85 percent of measured markets, with 148 out of 174 metropolitan statistical areas1 (MSAs) showing gains based on closings in the first quarter compared with the first quarter of 2014. Twenty-five areas (14 percent) recorded lower median prices from a year earlier.
The number of rising markets in the first quarter was mostly unchanged compared to the fourth quarter of last year, when price increases were recorded in 85 percent of metro areas. Fifty-one metro areas in the first quarter (29 percent) experienced double-digit increases, a sharp increase from the 24 metro areas in the fourth quarter of 2014. Thirty-seven metro areas (21 percent) experienced double-digit increases in the first quarter of 2014.
Lawrence Yun, NAR chief economist, says after moderating to healthier levels of growth at the end of 2014, prices picked up in several metro areas during the first quarter. "Sales activity to start the year was notably higher than a year ago, as steady hiring and low interest rates encouraged more buyers to enter the market," he said. "However, stronger demand without increasing supply led to faster price growth in many markets."
Adds Yun, "Sales could soften slightly in some of these markets seeing sharp price appreciation unless housing supply markedly improves and tempers its unhealthy level of growth."
The national median existing single-family home price in the first quarter was $205,200, up 7.4 percent from the first quarter of 2014 ($191,100). The median price during the fourth quarter of 2014 increased 5.8 percent from a year earlier.
Total existing-home sales2, including single family and condo, declined 1.8 percent to a seasonally adjusted annual rate of 4.97 million in the first quarter from 5.06 million in the fourth quarter of 2014, but are 6.2 percent higher than the 4.68 million pace during the first quarter of 2014.
At the end of the first quarter, there were 2.00 million existing homes available for sale3, slightly above the 1.96 million homes for sale at the end of the first quarter in 2014. The average supply during the first quarter was 4.6 months—down from 4.9 months a year ago. A supply of 6 to 7 months represents a healthy balance of supply between buyers and sellers.
"Homeowners throughout the country have enjoyed accumulating household wealth through the steady rise in home values in the past few years," says Yun. "However, some homeowners are hesitant to move-up and sell because they aren't confident they'll find another home to buy. This trend—in addition to subpar homebuilding activity—is leading to the ongoing inventory shortages and subsequent run-up in prices seen in many markets."
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 $900,000; San Francisco, $748,300; Honolulu, $699,300; Anaheim-Santa Ana, Calif., $685,700; and San Diego, $510,300.
The five lowest-cost metro areas in the first quarter were Youngstown-Warren-Boardman, Ohio, where the median single-family home price was $64,300; Cumberland, Md., $71,600; Rockford, Ill., $78,600; Decatur, Ill., $82,200; and Toledo, Ohio, $83,800.
Adds Yun, "Because of some volatility in smaller markets, it's wise to look at the long-term trend for a direction on prices."
Metro area condominium and cooperative prices—covering changes in 61 metro areas—showed the national median existing-condo price was $193,500 in the first quarter, up 1.5 percent from the first quarter of 2014 ($190,600). Forty-seven metro areas (77 percent) showed gains in their median condo price from a year ago; 14 areas had declines.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage during the first quarter remained below 4 percent for the second consecutive quarter at an overall average rate of 3.72 percent, down from 3.97 percent during the fourth quarter of 2014. They were 4.36 percent in the first quarter of 2014.
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says with home prices on the rise in many parts of the country, low interest rates have helped keep affordability in check for those entering the market. "Realtors® are reporting increased foot traffic this spring as more consumers are feeling confident about their financial situation and looking to lock-in before rates eventually start to climb," he said. "With supply remaining tight—especially at the entry-level price range—buyers will need the expertise and local market insight of a Realtor® to help them through each intricate step of the buying process."
Lower interest rates and an uptick in the national family median income ($66,257) slightly improved affordability in the first quarter compared to the first quarter of last year4. To purchase a single-family home at the national median price, a buyer making a 5 percent downpayment would need an income of $43,466, a 10 percent downpayment would require an income of $41,178, and $36,603 would be needed for a 20 percent downpayment.
Total existing-home sales in the Northeast dropped 11.2 percent in the first quarter but still remained 2.2 percent above the first quarter of 2014. The median existing single-family home price in the Northeast was $245,000 in the first quarter, up 2.4 percent from a year ago.
In the Midwest, existing-home sales declined 2.0 percent in the first quarter but are 6.3 percent higher than a year ago. The median existing single-family home price in the Midwest increased 8.9 percent to $156,600 in the first quarter from the same quarter a year ago.
Existing-home sales in the South fell slightly (0.5 percent) in the first quarter but are 7.8 percent above the first quarter of 2014. The median existing single-family home price in the South was $182,300 in the first quarter, 8.2 percent above a year earlier.
In the West, existing-home sales increased 1.5 percent in the first quarter and are 5.4 percent above a year ago. The median existing single-family home price in the West increased 5.8 percent to $295,500 in the first quarter from the first quarter of 2014.
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).
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%.
NOTE: Existing-Home Sales for April will be released May 21, the second quarter Commercial Real Estate Report/Forecast will be released May 26, and the Pending Home Sales Index for April will be released May 28; release times are 10:00 a.m. EDT.