Price Increase Reflects Shift to More Costly Homes

RealtyTrac reports a very large increase in the median price of a home sold in the U.S. in May compared to the median price in April.  There was also a surge in the price on an annual basis, one more in keeping with the types of price hikes that were seen in 2013.

The median price of a residential property including single family homes, condos, and townhomes was $180,000 in May, a 6 percent jump from the previous month and 13 percent higher than the median in May 2013.  The annual increase was the second consecutive double digit gain and the largest since prices hit their post-recession low in March 2012.  RealtyTrac's median price figures include sales of both distressed and non-distressed properties.

RealtyTrac said one factor behind the increase was the shrinking share of sales held by distressed properties which typically sell at a substantial discount.  Distressed sales and short sales accounted for 14.3 percent of homes sold in May, down from 15.6 percent the previous month and 15.9 percent in May 2013.  The median price of a distressed property was $120,000 while non-distressed residences had a median of $190,000.

A factor with a larger bearing on the rising prices however, was what RealtyTrac identified as a shift away from lower cost homes to those in the higher price ranges.  The share of home sales in all price ranges below $200,000 decreased from a year ago.  The lower the price, the larger the decrease.  The share of homes priced between $100,000 and $200,000 decreased 5 percent from a year ago, while the share of homes between $50,000 and $100,000 decreased 13 percent and the share of homes priced below $50,000 - often highly distressed homes - decreased 22 percent.

Conversely, sales of homes priced above $200,000 increased as a share of total sales, both from the previous month and from a year ago.  In general the higher the price, the greater the increase with sales in the $200,000 to $300,000 price range up 2 percent from the previous month and 6 percent from a year ago, but the share of home sales in all price ranges above $750,000 was up more than 20 percent from a year ago.  Sales of homes priced in the $200,000 to $400,000 range accounted for 32 percent of sales, the highest percentage since September 2008.

It is important to note that far fewer homes sell in the lowest and highest price ranges so even a small up-or-down tick in the number of sales can have a disproportionate impact on percentages such as the whopping near six-fold increase in the highest price category.

"Distressed sales continue to represent a smaller share of the overall sales pie nationwide, helping to boost median home prices higher given that distressed sales tend to be in lower price ranges," said Daren Blomquist, vice president at RealtyTrac. "When broken down by average price range, U.S. sales are clearly shifting away from the lower end. Properties selling below $200,000 represented 50 percent of all sales in May, but that was down from a 55 percent share a year ago. Meanwhile, the share of homes selling above $200,000 increased from a 45 percent a year ago to a 50 percent in May 2014."

RealtyTrac also notes, in its May 2014 Residential and Foreclosure Sales Report, that home sales in May were at a seasonally adjusted annual rate of 5.15 million, virtually unchanged from April and up less than 1 percent from a year earlier. 

The 1 percent increase in U.S. annualized sales in May from a year ago was the smallest increase in any month so far this year, and the 0.19 increase from the previous month marked the eighth consecutive month with flat or declining home sales on a month-over-month basis.

Annualized sales volume in May decreased from a year ago in 23 states and the District of Columbia, along with 31 of the nation's 50 largest metropolitan statistical areas.  Among states with significant drops in sales volume were California (-15 percent), Arizona (-10 percent), and Nevada (-7 percent). 

Major metro areas with decreasing sales volume from a year ago included Boston (-23 percent), Fresno, Calif., (-22 percent), Orlando (-18 percent), Los Angeles (-16 percent), and Phoenix (-13 percent).