Re-Acceleration in Home Prices

Good news for sellers: Home prices are on the rise. But buyers should brace for higher prices.

Nearly all—93%—of the largest metros in the U.S. saw home prices rise in the third quarter over the past year. A shortage of homes for sale, combined with higher demand, continues to push home prices higher, according to the latest quarterly report from the National Association of REALTORS®, released Thursday.

While the majority of metros saw higher prices in the third quarter, a few markets did register lower prices, notably in areas long-known for high costs. Single-family median home prices moderated in the third quarter in markets such as San Jose-Sunnyvale-Santa Clara, Calif. (–4.6%); San Francisco-Oakland-Hayward, Calif. (–2.5%); and San Diego-Carlsbad, Calif. (–0.8%).

Good News to Buyers: ‘Affordability Improves’

Low interest rates are helping to boost housing affordability. Nearly 67 percent of new and existing homes sold between January and the end of March were affordable to families earning the U.S. median income of $65,800, according to the latest National Association of Home Builders/Wells Fargo Housing Opportunities Index.

The national median home price fell from $215,000 in the fourth quarter to $210,000 in the first quarter. Meanwhile, average mortgage rates dropped from 4.29 percent to 4.03 percent in that time period.

“Now is a great time for consumers to buy homes,” says NAHB Chairman Tom Woods. “Both first-time and move-up buyers can take advantage of these favorable market conditions and start building their American Dream.”

Source: National Association of Home Builders

Luxury Market Takes Larger Chunk of Home Sales

The share of home sales in the $200,000-and-below price range is down 9 percent from a year ago, while those above $200,000 have increased 10 percent in the same time period, according to the latest housing report from RealtyTrac, which reflects August housing data.

Broken down further, the share of sales between $500,000 and $1 million rose 18 percent from year-ago levels, and the share of sales higher than $1 million jumped 38 percent year-over-year.

Overall, RealtyTrac’s report shows that the share of sales above $500,000 rose 23 percent from a year ago.

“Higher-end properties are taking up a bigger share of a smaller home-sales pie, boosting the median home price nationwide higher, even as home-price appreciation slows to single digits in many of last year’s red-hot local housing markets,” says Daren Blomquist, vice president at RealtyTrac. “On the other hand, markets where large institutional investors and other buyers have not picked clean lower-priced inventory are continuing to see strong, double-digit increases in median home prices.”

Source: RealtyTrac

Rising Home Prices Press Down Affordability

While housing affordability rose from January to February in some select markets, it’s lower year-over-year as home prices continue to rise while wages stay mostly stagnant, according to the National Association of REALTORS®’ latest Housing Affordability Index. The index is based on median home prices, family incomes, and average mortgage interest rates.

The median single-family home price is $189,200, up 9 percent from year-ago levels. Mortgage rates have also been on the rise, up a full percentage point from year-ago levels. Meanwhile, income levels have risen 1.9 percent in the past year.

Affordability is up slightly from a month ago in the Northeast and Midwest, while the West and South saw a minor drop in February month-over-month, according to NAR’s index. However, affordability is down in all regions from year-ago levels. The West has seen the largest decline in affordability in the past year, due to a 17 percent price gain.

Source: “Latest Housing Affordability Data,” National Association of REALTORS®’ Economists’ Outlook blog (April 11, 2014)