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Home prices showed continued growth in a majority of metropolitan areas in the third quarter, but all four major regions saw increases at or below five percent from a year ago, according to the latest quarterly report by the National Association of Realtors (NAR).
The median existing single-family home price increased in 73 percent of measured markets, with 125 out of 172 metropolitan statistical areas (MSAs) showing gains based on closings in the third quarter compared with the third quarter of 2013. Forty-seven areas (27 percent) recorded lower median prices from a year earlier.
The number of rising markets in the third quarter was mostly unchanged from the second quarter, when price increases were recorded in 71 percent of metro areas. Sixteen areas in the third quarter (nine percent) had double-digit increases, a sharp decline from the 54 areas (33 percent) in the third quarter of 2013. Nineteen areas experienced increases in the double-digits in the second quarter of this year.
“Home-price gains returned to more normalized levels of low- to mid-single digit rate of appreciation in many metro markets as inventory levels steadily increased,” Lawrence Yun, NAR chief economist, said. “Moreover, there are a good number of local markets that are still remarkably affordable with median prices at or under $200,000.”
The national median existing single-family home price in the third quarter was $217,300, up 4.9 percent from the third quarter of 2013 ($207,100). The median price during the second quarter of 2014 increased 4.2 percent from a year earlier.
Total existing-home sales, including single family and condo, increased 5.2 percent to a seasonally adjusted annual rate of 5.12 million in the third quarter from 4.87 million in the second quarter, but are still 3.8 percent below the 5.32 million pace during the third quarter of 2013.
“Given the improving labor market and historically low interest rates, more buyers are anticipated to enter the market next year,” said Yun.
Total housing inventory continued to make strides at the end of the third quarter at 2.30 million existing homes available for sale, which is six percent higher than a year ago. The average supply during the third quarter was 5.4 months; it was five months in the third quarter of 2013. A supply of six to seven months represents a rough balance between buyers and sellers.
NAR President Steve Brown, co-owner of Irongate Inc. Realtors in Dayton, Ohio, says traditional buyers are entering a more favorable market. “With inventory levels at a rate closer to supporting overall demand, bidding wars are occurring less—giving buyers more time to view homes and secure financing,” Brown said. “Additionally, Realtors across the country continue to report less investor activity and fewer all-cash sales in their markets compared to earlier in the year.”
Distressed homes—foreclosures and short sales generally sold at discount—accounted for nine percent of third quarter sales, down from 14 percent a year ago.
“Distressed sales are becoming less prevalent in many parts of the country and will likely be in the low single-digits percentagewise at this time next year,” said Yun.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage held steady during the third quarter to an overall average rate of 4.14 percent, down from 4.23 percent during the second quarter of the year. They were 4.4 percent in the third quarter of 2013.
Slightly lower mortgage rates and an uptick in the national family median income ($65,562) kept affordability in the third quarter roughly in line with the second quarter6. To purchase a single-family home at the national median price, a buyer making a 5 percent downpayment would need an income of $48,334, a 10 percent downpayment would require an income of $45,790, and $40,702 would be needed for a 20 percent downpayment.
Metro area condominium and cooperative prices—covering changes in 61 metro areas—showed the national median existing-condo price was $211,000 in the third quarter, up 2.7 percent from the third quarter of 2013 ($205,500). Forty-one metro areas (67 percent) showed increases in their median condo price from a year ago; 20 areas had declines.
The five most expensive housing markets in the third quarter were the San Jose, Calif., metro area, where the median existing single-family price was $860,000; San Francisco, $744,400; Anaheim-Santa Ana, Calif., $697,000; Honolulu, $677,600; and San Diego, $517,800.
The five lowest-cost metro areas in the third quarter were Youngstown-Warren-Boardman, Ohio, where the median single-family home price was $84,500; Cumberland, Md., $93,200; Rockford, Ill., $98,100; Decatur, Ill., $101,900; and Toledo, Ohio, $107,000.
Regionally, total existing-home sales in the Northeast rose 7.0 percent in the third quarter but are 5.2 percent below the third quarter of 2013. The median existing single-family home price in the Northeast was $261,700 in the third quarter, up 2.2 percent from a year ago.
In the Midwest, existing-home sales increased 7.4 percent in the third quarter but remain 4.7 percent below a year ago. The median existing single-family home price in the Midwest increased 5.0 percent to $172,700 in the third quarter from the same quarter a year ago.
Existing-home sales in the South climbed 3.6 percent in the third quarter but are 0.8 percent below the third quarter of 2013. The median existing single-family home price in the South was $189,400 in the third quarter, 4.5 percent above a year earlier.
In the West, existing-home sales rose 4.8 percent in the third quarter but remain 7.2 percent below a year ago. The median existing single-family home price in the West jumped 4.9 percent to $302,300 in the third quarter from the third quarter of a year ago.