Price Increases Balancing to Benefit Buyer and Seller -NAR

Home price growth continued to decelerate during the second quarter and the National Association of Realtors (NAR) said the quarter ended with year-over-year price appreciation at the slowest pace since 2012.  The national median price for an existing single family home in the second quarter was $212,400, a 4.4 percent increase from the median of $203,400 in the second quarter of 2013.  The year-over-year median price increase in the first quarter of 8.3 percent.  

The pattern held in many metropolitan areas as well as fewer MSAs saw rising prices in the second quarter than in the first.  Of 173 metropolitan areas tracked by NAR, 122 or 71 percent posted price gains in the second quarter over the same period in 2013.  Forty seven areas or 27 percent had lower median prices for the comparable periods.  In the first quarter 74 percent of the metropolitan areas posted year-over-year increases and for 37 areas those gains were in double digit gains compared to only 19 areas in the second quarter.

Metro area condominium and cooperative prices - covering changes in 62 metro areas - showed the national median existing-condo price was $211,100 in the second quarter, up 5.9 percent from the second quarter of 2013 ($199,300). Forty-seven metro areas (76 percent) showed increases in their median condo price from a year ago; 15 areas had declines.

Lawrence Yun, NAR chief economist, says price increases are balancing out to benefit both buyers and sellers. "National median home prices began their most recent rise during the first quarter of 2012 but had climbed to unsustainable levels given the current pace of inflation and wage growth," he said. "At this slower but healthier rate, homeowners can continue steadily building equity. Meanwhile, for buyers, increased supply with moderate price gains is giving them better opportunities to choose."

Despite the stabilization in price growth, Yun said sharp increases still exist in some markets and are impacting sales, notably on the West Coast where inventory shortages are more prevalent.  He called for more new construction for both homeownership and rentals to alleviate price and rent pressures and accommodate the growing population in that area. 

Sales of existing homes including single family houses and condominiums increased 5.8 percent in the second quarter to a seasonally adjusted annual rate of 4.87 million units compared to 4.60 million in the first quarter, but sales were 4.5 percent below the 5.10 million pace during the second quarter of 2013.

Short sales and sales of foreclosed homes represented 12 percent of transactions during the second quarter, down from 17 percent a year earlier.  Yun pointed out that the lessening influence of distressed homes in the marketplace would probably mean fewer appraisal problems. 

Lower interest rates and a slight 0.7 percent rise in the national family median income ($64,751) led to improved buying power in a majority of metro areas during the second quarter. To purchase a single-family home at the national median price, a buyer making a 5 percent downpayment would need an income of $47,816 and $40,266 would be needed for a 20 percent downpayment.

The housing inventory increased by 6.5 percent compared to the second quarter of 2013.  There were an estimated 2.30 million existing homes for sale in the quarter, an average supply of 5.6 months up from 5.1 months the previous year but still below the 6 to 7 month supply NAR says represents a rough balance between buyers and sellers.

NAR President Steve Brown says even with the increase in supply, Realtors across the country are reporting that properties are selling faster than earlier in the year. "The improving economy and lower interest rates are increasing the pool of interested buyers," he said. "On the contrary, competition remains tight and all-cash offers are still a common occurrence. This inevitably is causing hesitation for some first-time buyers, who are more likely to have lower downpayments and need to secure financing amidst tight credit conditions."

Regionally, total existing-home sales in the Northeast rose 5.1 percent in the second quarter but are 4.1 percent below the second quarter of 2013. The median existing single-family home price in the Northeast was $255,500 in the second quarter, down slightly (0.9 percent) from a year ago.

In the Midwest, existing-home sales increased 9.4 percent in the second quarter but remain 6.1 percent below a year ago. The median existing single-family home price in the Midwest increased 4.4 percent to $167,600 in the second quarter from the same quarter a year ago.

Existing-home sales in the South climbed 3.4 percent in the second quarter but are 1.0 percent below the second quarter of 2013. The median existing single-family home price in the South was $187,300 in the second quarter, 3.7 percent above a year earlier.

In the West, existing-home sales rose 7.1 percent in the second quarter but remain 9.0 percent below a year ago. The median existing single-family home price in the West jumped 7.3 percent to $297,400 in the second quarter from the second quarter of a year ago.