The majority of homes in metropolitan areas in the third quarter experienced robust year-over-year price gains, with the national median price showing the strongest annual growth in nearly eight years, according to the latest quarterly report by the National Association of Realtors.
The median existing single-family home price increased in 88% of measured markets, with 144 out of 163 metropolitan statistical areas1 (MSAs) showing gains based on closings in the third quarter compared with the third quarter of 2012. Fifty-four areas, 33%, had double-digit increases, while 19 had price declines.
In the second quarter, price gains were recorded in 87% of metro areas from a year earlier, while in the third quarter of last year, 81% of available areas showed annual increases, but only 18% of markets rose by double-digit amounts.
Lawrence Yun, NAR chief economist, said market momentum is changing. "Rising prices and higher interest rates have taken a bite out of housing affordability," he said. "However, we have the ongoing situation of more buyers than sellers in the market, so lower sales will help to take the pressure off home price growth and allow them to rise slowly at a single-digit growth rate in 2014."
Even with the erosion in affordability, a companion breakout in this report on income requirements to buy a median-priced home on a metro area basis shows most buyers can afford a home, but less so in pricier areas.
The five most expensive housing markets were the San Jose, Calif., metro area, where the median existing single-family price was $805,000; San Francisco, $705,000; Honolulu, $679,800; Anaheim-Santa Ana, Calif., $670,700; and San Diego, where the median price was $485,000.
The five most affordable metro areas were Toledo, Ohio, with a median single-family price of $87,500; Rockford, Ill., at $88,900; Decatur, Ill., $91,000; Ocala Fla., $103,600; and Topeka, Kan., with a median price of $106,900.
The national median existing single-family home price was $207,300 in the third quarter, up 12.5% from $184,300 in the second third of 2012, which is the strongest year-over-year increase since the fourth quarter of 2005 when it jumped 13.6%. In the second quarter the median price rose 12.2% from a year earlier.
The median price is where half of the homes sold for more and half sold for less. A smaller market share of lower priced homes accounts for some of the price growth. Distressed homes2 – foreclosures and short sales generally sold at discount – accounted for 14% of third quarter sales, down from 24% a year ago.
At the end of the third quarter there were 2.21 million existing homes available for sale, modestly higher than the third quarter of 2012, when 2.17 million homes were on the market. However, with higher sales, the average supply during the quarter was 5.0 months, down from 5.9 months in the third quarter of 2012.
Total existing-home sales,3 including single-family and condo, rose 5.9% to a seasonally adjusted annual rate of 5.36 million in the third quarter from 5.06 million in the second quarter, and were 13.0% above the 4.74 million level during the third quarter of 2012. Sales were at the highest pace since the first quarter of 2007, when they reached 5.66 million.
According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged 4.44% in the third quarter, up from 3.69% in the second quarter and 3.54% in the third quarter of 2012; the commitment rate is at the highest level since the second quarter of 2011 when it averaged 4.66%.
NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., said continued access to safe, affordable financing is critical. "NAR firmly believes that hardworking, creditworthy consumers should be able to achieve their dreams of owning a home," he said. "As legislators and regulators consider reforms to the secondary mortgage market, they must ensure that mortgage capital is available under all economic conditions so that qualified homebuyers have access to safe, affordable loan products."
A separate breakout of qualifying incomes to purchase a median-priced existing single-family home on a metropolitan area basis generally shows potential buyers had adequate income in most areas to purchase in the third quarter. Income requirements are determined using several scenarios on downpayment percentages, which assume 25% of gross income is devoted to mortgage principal and interest, with a mortgage interest rate of 4.4%.
The national median family income4 of $63,800 would readily qualify a buyer to purchase a median-priced home in the third quarter. However, to purchase a home at the national median price, a buyer making a 5% downpayment would only need an income of $47,800. With a 10% downpayment the required income would be $45,300, while with 20% down, the necessary income is $40,200.
In the condo sector, metro area condominium and cooperative prices – covering changes in 55 metro areas – showed the national median existing-condo price was $205,400 in the third quarter, up 15.1% from the third quarter of 2012. Forty-nine metros showed increases in their median condo price from a year ago and 6 areas had declines.
Regionally, total existing-home sales in the Northeast jumped 10.5% in the third quarter, and are 15.9% above the third of 2012. The median existing single-family home price in the Northeast was $256,800 in the third quarter, up 4.5% to from a year ago.
In the Midwest, existing-home sales rose 8.8% in the third quarter, and are 17.4% higher than a year ago. The median existing single-family home price in the Midwest increased 8.9% to $164,700 in the third quarter from the same quarter last year.
Existing-home sales in the South increased 4.3% in the third quarter, and are 12.2% above the third quarter of 2012. The median existing single-family home price in the South was $181,300 in the third quarter, up 12.2% from a year earlier.
In the West, existing-home sales rose 3.6% in the third quarter, and are 8.6% above a year ago. With ongoing regional inventory shortages, the median existing single-family home price in the West surged 17.0% to $289,100 in the third quarter from the third quarter of 2012.
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.
