Home-Price Gains Decelerate in Many Metro Areas during Second Quarter
WASHINGTON (August 12, 2014) – Home-price growth continued to moderate in many metropolitan areas in the second quarter and national year-over-year price appreciation is now at its slowest pace since 2012, according to the latest quarterly report by the National Association of Realtors®.
The median existing single-family home price increased in 71 percent of measured markets1, with 122 out of 173 metropolitan statistical areas2 (MSAs) showing gains based on closings in the second quarter compared with the second quarter of 2013. Forty-seven areas (27 percent) recorded lower median prices from a year earlier.
There were fewer rising markets in the second quarter compared to the first quarter, when price increases were recorded in 74 percent of metro areas. Furthermore, 19 areas in the second quarter (11 percent) had double-digit increases, a sharp decrease from the 37 areas last quarter and the overall average of 43 areas since the second quarter of 2013.
Lawrence Yun, NAR chief economist, says price increases are balancing out to the benefit for both buyers and sellers. “National median home prices began their most recent rise during the first quarter of 2012 but had climbed to unsustainable levels given the current pace of inflation and wage growth,” he said. “At this slower but healthier rate, homeowners can continue steadily building equity. Meanwhile, for buyers, increased supply with moderate price gains is giving them better opportunities to choose.”
The national median existing single-family home price in the second quarter was $212,400, up 4.4 percent from the second quarter of 2013 ($203,400). The median price during the first quarter of 2014 rose 8.3 percent from a year earlier.
Yun adds that despite the stabilization in price growth, sharp increases still exist in some markets and are impacting sales, notably on the West Coast where inventory shortages are more prevalent. “New construction for ownership housing and rentals is needed to alleviate price and rent pressures and accommodate their growing populations,” he said.
Total existing-home sales,3 including single-family and condo, increased 5.8 percent to a seasonally adjusted annual rate of 4.87 million in the second quarter from 4.60 million in the first quarter, but are 4.5 percent below the 5.10 million pace during the second quarter of 2013.
Distressed homes4 – foreclosures and short sales generally sold at discount – accounted for 12 percent of second quarter sales, down from 17 percent a year ago. “Fewer distressed sales will help diminish appraisal problems,” adds Yun.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell each month during the second quarter to an overall average rate of 4.23 percent, down from 4.36 percent during the first quarter of the year. They were 3.70 percent in the second quarter of 2013.
Lower interest rates and a slight rise (0.7 percent) in the national family median income ($64,751) led to improved buying power in a majority of metro areas during the second quarter5. To purchase a single-family home at the national median price, a buyer making a 5 percent downpayment would need an income of $47,816, a 10 percent downpayment would require an income of $45,299, and $40,266 would be needed for a 20 percent downpayment.
Total housing inventory6 showed much-needed improvement at the end of the second quarter at 2.30 million existing homes available for sale, which is 6.5 percent higher than a year ago. The average supply during the quarter was 5.6 months; it was 5.1 months in the second 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 even with the increase in supply, Realtors® across the country are reporting that properties are selling faster than earlier in the year7. “The improving economy and lower interest rates are increasing the pool of interested buyers,” he said. “On the contrary, competition remains tight and all-cash offers are still a common occurrence. This inevitably is causing hesitation for some first-time buyers, who are more likely to have lower downpayments and need to secure financing amidst tight credit conditions.”
Metro area condominium and cooperative prices – covering changes in 62 metro areas – showed the national median existing-condo price was $211,100 in the second quarter, up 5.9 percent from the second quarter of 2013 ($199,300). Forty-seven metro areas (76 percent) showed increases in their median condo price from a year ago; 15 areas had declines.
The five most expensive housing markets in the second quarter were the San Jose, Calif., metro area, where the median existing single-family price was $899,500; San Francisco, $769,600; Anaheim-Santa Ana, Calif., $691,900; Honolulu, $678,500; and San Diego, $504,200.
The five lowest-cost metro areas in the second quarter were Youngstown-Warren-Boardman, Ohio, where the median single-family home price was $78,600; Rockford, Ill., $85,300; Elmira, N.Y., $87,800; Decatur, Ill., $90,900; and Toledo, Ohio, $95,900.
Regionally, total existing-home sales in the Northeast rose 5.1 percent in the second quarter but are 4.1 percent below the second quarter of 2013. The median existing single-family home price in the Northeast was $255,500 in the second quarter, down slightly (0.9 percent) from a year ago.
In the Midwest, existing-home sales increased 9.4 percent in the second quarter but remain 6.1 percent below a year ago. The median existing single-family home price in the Midwest increased 4.4 percent to $167,600 in the second quarter from the same quarter a year ago.
Existing-home sales in the South climbed 3.4 percent in the second quarter but are 1.0 percent below the second quarter of 2013. The median existing single-family home price in the South was $187,300 in the second quarter, 3.7 percent above a year earlier.
In the West, existing-home sales rose 7.1 percent in the second quarter but remain 9.0 percent below a year ago. The median existing single-family home price in the West jumped 7.3 percent to $297,400 in the second quarter from the second 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.realtor.org/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®.
1The Myrtle Beach-Conway-North Myrtle Beach, SC-NC MSA and Wilmington, NC MSA will now be included in both the single-family and condo 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.
4Distressed sales are from a survey for the Realtors® Confidence Index.
5Income 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 4.2%.
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.
6Total 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).
7According to the June 2014 REALTORS® Confidence Index, properties were reported as selling faster for the sixth straight month, typically at 44 days.
NOTE: Existing-home sales for July will be released August 21, the second quarter Commercial Real Estate Report/Forecast will be released August 26, the Pending Home Sales Index for July will be released August 28; third quarter metro area home prices will be released November 6; release times are 10:00 a.m. EDT.