WASHINGTON (February 11, 2013) - A growing number of metropolitan areas had higher median home prices in the fourth quarter, with the national price showing the strongest year-over-year increase in seven years, according to the latest quarterly report by the National Association of Realtors®. A companion report shows record high housing affordability conditions for metro areas in 2012.
The median existing single-family home price rose in 133 out of 152 metropolitan statistical areas1 (MSAs) based on closings in the fourth quarter compared with same quarter in 2011, while 19 areas had price declines. In the third quarter 120 areas showed increases from a year earlier, while in the fourth quarter of 2011 only 29 metros were up.
Lawrence Yun , NAR chief economist, said all the conditions for strong price growth are at play. "Home sales are on a sustained uptrend, mortgage interest rates are hovering near record lows and unsold inventory is at the lowest level in 12 years," he said. "Home sales are being fueled by a pent-up demand and job creation, along with still favorable affordability conditions and rents rising at faster rates. Our population has been growing faster than overall housing stock, so supply and demand dynamics are very much at play." Yun added that more housing construction is needed to relieve some of the pressure in the market and keep home prices from overheating.
The national median existing single-family home price was $178,900 in the fourth quarter, up 10.0 percent from $162,600 in the fourth quarter of 2011, which is the strongest year-over-year price increase since the fourth quarter of 2005 when the median price jumped 13.6 percent. In the third quarter the price rose 8.8 percent from a year earlier.
The median price is where half of the homes sold for more and half sold for less; medians are more typical than average prices, which are skewed higher by a relatively small share of upper-end transactions.
A shrinking market share of lower priced homes continues to account for some of the price growth. Distressed homes2 - foreclosures and short sales generally sold at deep discounts - accounted for 23 percent of fourth quarter sales, down from 30 percent a year ago.
Total existing-home sales,3 including single-family and condo, rose 5.0 percent to a seasonally adjusted annual rate of 4.90 million in the fourth quarter from 4.66 million in the third quarter, and were 12.1 percent above the 4.37 million pace during the fourth quarter of 2011. Sales in the last quarter were at the highest level since the fourth quarter of 2009 when they reached 4.95 million.
At the end of the fourth quarter there were 1.82 million existing homes available for sale, which is 21.6 percent below the close of the fourth quarter of 2011 when 2.32 million homes were on the market. Unsold inventory is at the lowest level since January 2001 when there were 1.78 million homes for sale.
According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged a record low 3.36 percent in the fourth quarter, down from 3.54 percent in the third quarter and 4.01 percent in the fourth quarter of 2011.
NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., said favorable affordability conditions dominate the landscape. "In reality, home prices over-corrected on the downside and homes in most of the country were selling for less than replacement construction costs, which means they were undervalued," he said. "At the same time we've had record low mortgage interest rates and slow but steady improvements in median family income. Combined, these factors boosted housing affordability conditions to the highest on record in 2012."
NAR's national annual Housing Affordability Index, with breakouts for metropolitan areas, rose to a record high 193.5 in 2012 from 186.4 in 2011. The index is calculated on the relationship between median home price, median family income and average effective mortgage interest rate. The higher the index, the stronger household purchasing power; recordkeeping began in 1970.
An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent downpayment and 25 percent of gross income devoted to mortgage principal and interest payments. For first-time buyers making small downpayments, the affordability levels are relatively lower.
"The housing affordability index shows that the national median income of families was almost double the income needed to buy a median-priced home in 2012, so most buyers are able to stay well within their means," Yun said. "Even with rising home prices, conditions are expected to stay very favorable with the index averaging 161 in 2013, which would be the third best on record."
Metro areas with the greatest housing affordability conditions in 2012 include the Detroit-Warren-Livonia area of Michigan, with an index of 571.1; Decatur, Ill., at 419.5; and Lansing-East Lansing, Mich., at 397.0. There were 145 out of 156 metros that set records for housing affordability in 2012.
In the condo sector, metro area condominium and cooperative prices - covering changes in 56 metro areas - showed the national median existing-condo price was $179,900 in the fourth quarter, up 12.2 percent from the fourth quarter of 2011. Forty-seven metros showed increases in their median condo price from a year ago, one was unchanged and eight areas had declines.
Regionally, existing-home sales in the Northeast increased 2.2 percent in the fourth quarter and are 12.9 percent above the fourth quarter of 2011. The median existing single-family home price in the Northeast rose 0.7 percent to $228,400 in the fourth quarter from a year ago.
In the Midwest, existing-home sales rose 5.6 percent in the fourth quarter and are 18.3 percent higher than a year ago. The median existing single-family home price in the Midwest increased 9.2 percent to $143,800 in the fourth quarter from the same quarter in 2011.
Existing-home sales in the South rose 5.0 percent in the fourth quarter and are 13.2 percent above the fourth quarter of 2011. The regional median existing single-family home price was $160,100 in the fourth quarter, up 9.1 percent from a year earlier.
In the West, which is the region most impacted by limited housing supplies, existing-home sales increased 5.9 percent in the fourth quarter, and are 5.0 percent higher than a year ago. The median existing single-family home price in the West jumped 20.1 percent to $245,200 in the fourth quarter from the fourth 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 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.realtor.org/topics/metropolitan-median-area-prices-and-affordability/data . 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®.
1 Areas 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 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.
2 Distressed sales are from a survey for the Realtors® Confidence Index.
3 The 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.
First quarter metro area home prices and quarterly existing-home sales will be released May 9 at 10:00 a.m. EDT.