First Quarter Metro Area Home Prices Stabilizing, Sales Up and Inventory Down
WASHINGTON (May 9, 2012) – Median existing single-family home prices are firming in many metropolitan areas, while improving sales and declining inventory are creating more balanced conditions, according to the latest quarterly report by the National Association of Realtors®.
The median existing single-family home price rose in 74 out of 146 metropolitan statistical areas1 (MSAs) based on closings in the first quarter from the same quarter in 2011, while 72 areas had price declines. In the fourth quarter of 2011 only 29 areas were showing gains from a year earlier. A new breakout of income requirements on a metro basis shows most buyers have the necessary income to buy a home in their area, assuming a favorable credit rating.
Lawrence Yun, NAR chief economist, said there is some volatility in the price performance. “Home prices are more volatile than normal because of sudden upswings in buyer activity in some localities, and also are affected by the prevalence of distressed sales,” he said. “Home prices lag sales activity because the transactions were negotiated mostly in the previous quarter. Given the steadily dwindling supply of inventory and notably higher listing prices that are being negotiated today, prices are expected to show further improvements in the near future.”
Yun said a big part of the story is housing inventory. “We now have broad shortages of lower priced homes in much of the country, with very tight supply in Western states for homes through the middle price ranges. This is good news for many sellers who wish to list now, or for those waiting for prices to improve.”
At the end of the first quarter there were 2.37 million existing homes available for sale, which is 21.8 percent below the close of the first quarter of 2011 when there were 3.03 million homes on the market. There has been a sustained downtrend since inventories set a record of 4.04 million in the summer of 2007.
The national median existing single-family home price was $158,100 in the first quarter, which is 0.4 percent below $158,700 in the first quarter of 2011. The median is where half sold for more and half sold for less. Distressed homes2 – foreclosures and short sales which sold at deep discounts – accounted for 32 percent of first quarter sales; they were 38 percent a year ago.
Total existing-home sales,3 including single-family and condo, increased 4.7 percent to a seasonally adjusted annual rate of 4.57 million in the first quarter from a downwardly revised 4.37 million in the fourth quarter, and were 5.3 percent above the 4.34 million level during the first quarter of 2011 when sales spiked.
“This is the highest first quarter sales pace since 2007,” Yun said. “With strong market fundamentals, total home sales this year should rise 7 to 10 percent.”
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said there are more opportunities in today’s market. “Historically favorable housing affordability conditions are making it easier for buyers to enter the market despite the unnecessarily tight credit conditions,” he said. “Housing supply and demand are roughly balanced with overall housing supply at the lowest level in six years, putting sellers on an even footing with buyers in most markets.”
Included with this report is a new breakout on qualifying incomes to purchase a median-priced existing single-family home on a metropolitan area basis, assuming downpayments of 5 percent, 10 percent or 20 percent, and an interest rate of 4 percent with 25 percent of gross income devoted to mortgage principal and interest.
“Qualifying incomes are well below median incomes in most of the country, which means home buyers generally can stay well within their means,” Yun said. “For example, a buyer in Indianapolis making a 10 percent downpayment would need an annual income of $24,0004 to purchase a median-priced home, while in Seattle it would be $55,300. For now, buyers are facing an extraordinarily advantageous situation if they can obtain a mortgage.”
The national median family income was $61,000 in the first quarter. However, to purchase a home at the national median price, a buyer making a 5 percent downpayment would only need a $34,700 income. With a 10 percent downpayment the required income would be $32,900, while with 20 percent down, the income drops to $29,300.
First-time buyers purchased 33 percent of homes in the first quarter, unchanged from the fourth quarter; they were 32 percent in the first quarter of 2011.
The share of all-cash home purchases in the first quarter was 32 percent, up from 29 percent in the fourth quarter; they were 33 percent in the first quarter of 2011. Investors, drawn by bargain prices and who make up the bulk of cash purchasers, accounted for 22 percent of all transactions in the first quarter, up from 19 percent in the fourth quarter; they were 21 percent a year ago.
In the condo sector, metro area condominium and cooperative prices – covering changes in 52 metro areas – showed the national median existing-condo price was $157,200 in the first quarter, which is up 3.4 percent from the first quarter of 2011. Eighteen metros showed increases in their median condo price from a year ago and 34 areas had declines.
Regionally, existing-home sales in the Northeast jumped 8.6 percent in the first quarter and are 6.6 percent above the first quarter of 2011. The median existing single-family home price in the Northeast declined 3.2 percent to $226,300 in the first quarter from a year ago.
In the Midwest, existing-home sales rose 5.5 percent in the first quarter and are 11.7 percent higher than a year ago. The median existing single-family home price in the Midwest increased 0.8 percent to $125,300 in the first quarter from the same quarter in 2011.
Existing-home sales in the South increased 2.1 percent in the first quarter and are 4.1 percent above the first quarter in 2011. The median existing single-family home price in the South rose 1.2 percent to $143,600 in the first quarter from a year earlier.
Existing-home sales in the West rose 5.9 percent in the first quarter and are 1.4 percent higher than a year ago. The median existing single-family home price in the West slipped 0.9 percent to $196,200 in the first quarter from the first quarter of 2011.
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 150 Metropolitan Statistical Areas (MSAs). In some cases the estimated 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 specific business purposes, local data from their association may be more relevant.
Data tables for MSA home prices (single family and condo) are posted at www.realtor.org/topics/metropolitan-median-area-prices-and-affordability. 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. A list of counties included in MSA definitions is available at: www.census.gov/population/estimates/metro-city/0312msa.txt.
Regional median home prices include rural areas and samples of many 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 because the level of distressed sales, which artificially depress median prices, can vary notably in given markets. 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, first-time buyers, investors and all-cash transactions 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.
Second quarter metro area home prices and quarterly existing-home sales will be released August 9 at 10:00 a.m. EDT.
Information about NAR is available at www.realtor.org. News releases are posted in the website’s “News and Commentary” tab. Statistical data in this release, as well as other tables and surveys, are posted in the “Research and Statistics” tab of www.realtor.org.
REALTOR® is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics. Not all real estate agents are REALTORS®. All REALTORS® are members of NAR.