Price Growth Continues, But Too Quickly in Some Areas

Home prices continued to increase asrnbroadly if not as rapidly as in previous periods thernNational Association of Realtors® (NAR) reported today.  Median prices increased in the first quarterrnof 2014 in 125 or 74 percent of the 170 metropolitan areas NAR tracks.  In the first quarter of 2013 89 percent ofrnmarkets reported year-over-year gains.</p

Thernnational median existing single-family home price was $191,600 in the firstrnquarter, up 8.6 percent from $176,400 in the first quarter of 2013. In thernfourth quarter the median price rose 10.1 percent from a year earlier. Distressedrnhomes – foreclosures and short sales generally sold at discount -rnaccounted for 15 percent of first quarter sales, down from 23 percent a yearrnago. In the condo sector, metro area condominium and cooperative prices -rncovering changes in 59 metro areas – showed the national median existing-condornprice was $191,400 in the first quarter, up 10.8 percent from the first quarterrnof 2013. Fifty metros showed increases in their median condo price from a yearrnago, and nine areas had declines.</p

LawrencernYun, NAR chief economist, said the price trend is favorable. “The cooling raternof price growth is needed to preserve favorable housing affordabilityrnconditions in the future, but we still need more new-home construction to fullyrnalleviate the inventory shortages in much of the country,” he said. “Limitedrninventory is creating unsustainable and unhealthy price growth in some largernmarkets, notably on the West Coast.”</p

Therernwere double digit price increases in 37 metro areas and seven had increases inrnexcess of 20 percent on an annual basis: South Bend-Mishawaka, Indiana (26.8rnpercent); Naples-Marco Island, Florida (26.6 percent); Las Vegas (23.5 percent);rnLansing, Michigan (23.4 percent); Atlanta-Marietta (23.3 percent);rnRiverside-San Bernardino (23.1 percent); Sacramento (22.2 percent).</p

Forty-fivernmetro areas had annual decreases, some of them substantial.  Among the largest were Cumberland, Marylandrn(-18.6 percent); Springfield, Illinois (-15.1 percent); Florence, SouthrnCarolina (-12.3 percent); and Oshkosh, Wisconsin (-11.0 percent).</p

The five most expensive housing markets in the first quarter werernthe San Jose metro area, where the median existing single-family price wasrn$808,000; San Francisco, $679,800; Honolulu, $672,300; Anaheim-Santa Ana,rn$669,800; and San Diego, where the median price was $483,000.</p

The five lowest-cost metro areas were Youngstown-Warren-Boardman,rnOhio, with a median single-family home price of $64,600 in the first quarter;rnDecatur, Illinois, $69,600; Toledo, Ohio, $72,100; Rockford, Illinois, $73,100;rnand Cumberland at $81,400.</p

Inventory increased slightly from a year earlier.  There were 1.99 million existing homes forrnsale at the end of the first quarter compared to 1.93 million in the firstrnquarter of 2013.  The current inventoryrnis the equivalent of a 5.0 month supply compared to 4.6 months a year earlier.  A supply of 6 to 7 months represents a roughrnbalance between buyers and sellers.</p

Total existing-home sales, including single-family and condo, fellrn6.9 percent to a seasonally adjusted annual rate of 4.60 million in the firstrnquarter from 4.94 million in the fourth quarter, and were 6.6 percent below thern4.93 million level during the first quarter of 2013.  </p

NAR President Steve Brown saidrnthere’s been some erosion in housing affordability.rn”Both home prices and mortgage interest rates are higher than a year ago, butrnthe good news is that median income is enough to purchase a home in most areas.rnThere are good potential buying opportunities in areas where there has beenrnconsistent local job creation, and where prices have not risen significantly,rnor where they may be experiencing temporary declines,” he said.</p

Brown also expressedrnconcern about the mortgage insurance fees for FHA loans that he said have morernthan doubled since 2010 and may have priced 125,000 to 375,000 buyers out ofrnthe market. “When yourncombine the increases in home prices and interest rates with record-high premiums,rnhome purchases are becoming increasingly out of reach for many qualifiedrnborrowers who rely on FHA financing.” </p

Still, a separate NAR breakout of qualifying incomes tornpurchase a median-priced existing single-family home on a metropolitan area basisrndemonstrates sufficient buying power in the majority of metro areas.  Thernprojections assume several downpayment percentage scenarios and assume 25rnpercent of gross income devoted to mortgage principal and interest at arnmortgage interest rate of 4.4 percent.</p

The national median family income was $64,500 in thernfirst quarter.  However, to purchase a home at the national median price,rna buyer making a 5 percent downpayment would need an income of $44,200. rnWith a 10 percent downpayment the required income would be $41,800, while withrn20 percent down, the necessary income is only $37,200.  </p

Sales in the Midwest and Northeast were notably impacted by severernwinter weather, while limited inventory and reduced affordability affected thernWest.  Totalrnexisting-home sales in the Northeast fell 10.2 percent in the first quarter andrnare 6.8 percent below the first quarter of 2013. The median existingrnsingle-family home price in the Northeast was $239,300, up 2.2 percent from arnyear ago.</p

Inrnthe Midwest, existing-home sales dropped 11.5 percent in the first quarter andrnare 10.5 percent below a year ago. The median existing single-family home pricernin the Midwest increased 6.7 percent to $144,000 in the first quarter from thernsame quarter a year ago.</p

Existing-homernsales in the South declined 3.6 percent in the first quarter and are 0.7rnpercent below the first quarter of 2013. The median existing single-family homernprice in the South was $168,900 in the first quarter, up 7.7 percent from arnyear earlier.</p

Inrnthe West, existing-home sales fell 6.0 percent in the first quarter and arern12.4 percent below a year ago. The median existing single-family home price inrnthe West jumped 14.0 percent to $282,100 in the first quarter from the firstrnquarter of 2013.

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