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®.
The median existing single-family home price increased in 86 percent of measured markets, with 150 out of 1751 metropolitan statistical areas2 (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," he 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 6.0 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 sales2, including single family and condo, declined 1.0 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 sale4, 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 6 to 7 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," says 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 4 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 4 percent, rising rents and healthier local job markets are convincing more consumers to consider homeownership," he 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 quarter5. To purchase a single-family home at the national median price, a buyer making a 5 percent downpayment would need an income of $45,863, a 10 percent downpayment would require an income of $43,449, and $38,621would be needed for a 20 percent downpayment.
Regional Breakdown
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 6.0 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.
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.
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-affordability/data. 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®.
1Single-family median price data for the following MSAs will now be included in the quarterly price report: Bowling Green, KY; Cape Girardeau,MO-IL; and Sherman-Denison, TX.
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.
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.
4Total 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).
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 4.0%.
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