The majority of metropolitan areas experienced steady but slightly stronger price growth in the fourth quarter of 2014, behind a decline in housing supply and an uptick in demand fueled by lower interest rates and a stronger job market, according to the latest quarterly report by the National Association of Realtors (NAR). The median existing single-family home price increased in 86 percent of measured markets, with 150 out of 175 metropolitan statistical areas (MSAs) showing gains based on closings in the fourth quarter compared with the fourth quarter of 2013. Twenty-four areas (14 percent) recorded lower median prices from a year earlier.
There were more rising markets in the fourth quarter compared to the third quarter, when price increases were recorded in 73 percent of metro areas. Twenty-four areas in the fourth quarter (14 percent) had double-digit increases—a rise from 16 metro areas in the third quarter of 2014. Forty-two metro areas (26 percent) experienced double-digit increases in the fourth quarter of 2013.
Lawrence Yun, NAR chief economist, says improved sales activity compared to a year ago and tightening supply contributed to faster price appreciation in the final quarter of 2014.
“Home prices in metro areas throughout the country continue to show solid price growth, up 25 percent over the past three years on average,” Yun said. “This is good news for current homeowners but remains a challenge for buyers who are seeing home prices continue to outpace their wages. Low interest rates helped preserve affordability last quarter, but it’ll take stronger income gains and more housing supply to help meet the pent-up demand for buying.”
The national median existing single-family home price in the fourth quarter was $208,700, up six percent from the fourth quarter of 2013 ($196,900). For all of 2014, the median price increased 4.8 percent in the third quarter from a year earlier; 4.2 percent in the second quarter from a year earlier; and 8.3 percent in the first quarter from a year earlier.
Total existing-home sales,including single family and condo, declined one percent to a seasonally adjusted annual rate of 5.07 million in the fourth quarter from 5.12 million in the third quarter, but are 2.6 percent higher than the 4.94 million pace during the fourth quarter of 2013.
At the end of the fourth quarter, there were 1.85 million existing homes available for sale, slightly above the 2.01 million homes for sale during the fourth quarter of 2013. The average supply during the fourth quarter was 4.9 months—unchanged from a year ago. A supply of six to seven months represents a healthy balance of supply between buyers and sellers.
“Despite affordable housing conditions in most of the country, an upward pressure on home prices still persists in some metro areas—particularly in the West—where the current supply of new and existing-homes for sale is failing to keep pace with overall demand and growing populations,” said Yun. “Unless homebuilders significantly boost construction, housing supply shortages could develop and lead to further price acceleration this spring.”
Metro area condominium and cooperative prices—covering changes in 61 metro areas—showed the national median existing-condo price was $203,300 in the fourth quarter, up 3.3 percent from the fourth quarter of 2013 ($196,900). Forty-six metro areas (75 percent) showed increases in their median condo price from a year ago; 14 areas had declines.
The five most expensive housing markets in the fourth quarter were the San Jose, Calif., metro area, where the median existing single-family price was $855,000; San Francisco, $742,900; Honolulu, $701,300; Anaheim-Santa Ana, Calif., $688,500; and San Diego, $493,100.
The five lowest-cost metro areas in the fourth quarter were Youngstown-Warren-Boardman, Ohio, where the median single-family home price was $78,000; Rockford, Ill., $86,800; Toledo, Ohio, $87,100; Decatur, Ill., $90,400; and Cumberland, Md., $90,500.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell below four percent during the fourth quarter to an overall average rate of 3.97 percent, down from 4.14 percent during the third quarter of 2014. They were 4.30 percent in the fourth quarter of 2013.
NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says sparked by an improving economy, Realtors throughout the country are reporting slightly improved buyer demand compared to a year ago.
“Interest rates below four percent, rising rents and healthier local job markets are convincing more consumers to consider homeownership,” Polychron said. “For those entering the market in the months ahead, working with a Realtor will make the complex buying process easier to navigate as buyers review their options, secure financing and ultimately close on a home.”
Lower interest rates and an uptick in the national family median income ($65,782) slightly improved affordability in the fourth quarter compared to the third quarter. To purchase a single-family home at the national median price, a buyer making a five percent downpayment would need an income of $45,863, a 10 percent downpayment would require an income of $43,449, and $38,621 would be needed for a 20 percent downpayment.
Total existing-home sales in the Northeast rose 2.5 percent in the fourth quarter and are 4.1 percent below the fourth quarter of 2013. The median existing single-family home price in the Northeast was $246,300 in the fourth quarter, up 2.2 percent from a year ago.
In the Midwest, existing-home sales declined 4.7 percent in the fourth quarter and are 0.6 percent below a year ago. The median existing single-family home price in the Midwest increased 6.2 percent to $162,000 in the fourth quarter from the same quarter a year ago.
Existing-home sales in the South climbed 2.7 percent in the fourth quarter and are 5.8 percent above the fourth quarter of 2013. The median existing single-family home price in the South was $183,500 in the fourth quarter, 6.2 percent above a year earlier.
In the West, existing-home sales fell six percent in the fourth quarter and are 0.9 percent below a year ago. The median existing single-family home price in the West jumped 4.8 percent to $299,500 in the fourth quarter from the fourth quarter of 2013.