More Areas Seeing Double Digit Home Price Gains

Home price appreciation accelerated in many metropolitan areas in the first quarter of 2015.  The National Association of Realtors® (NAR) again said the cause for rising prices was a lagging inventory of available houses in the face of a growing demand.

Median home prices increased in the first quarter in 85 percent of the 174 metropolitan statistical areas (MSAs) tracked by NAR, the same percentage as posted increases in the fourth quarter of 2014.  However in 51 of those areas (29 percent) the gains were in double digits, more than double the number (24) showing such growth a quarter earlier and significantly higher than the 37 MSAs in that category in the first quarter of 2014. Twenty-five areas (14 percent) saw median prices decline year over year.

Lawrence Yun, NAR chief economist, says after moderating to healthier levels of growth at the end of 2014, prices picked up in several metro areas during the first quarter. "Sales activity to start the year was notably higher than a year ago, as steady hiring and low interest rates encouraged more buyers to enter the market," he said. "However, stronger demand without increasing supply led to faster price growth in many markets."

Adds Yun, "Sales could soften slightly in some of these markets seeing sharp price appreciation unless housing supply markedly improves and tempers its unhealthy level of growth."

The national median existing single-family home price increased in the first quarter by 7.4 percent to $205,200.  The year-over-year gain was 7.4 percent compared to an annual gain of 5.8 percent in Q4. 

The median price of metro area condominium and cooperative prices nationally (tracking 61 MSAs) was $193,500 in the first quarter, up 1.5 percent from the first quarter of 2014 ($190,600). Forty-seven metro areas (77 percent) showed gains in their median condo price from a year ago and 14 areas declined.

Sales of existing homes in the first quarter were down 1.8 percent on a seasonally adjusted annual basis to a rate of 4.97 million unit from 5.06 million the previous quarter but those sales were 6.2 percent higher than during the same quarter in 2014. 

Inventories rose slightly during the first quarter, from 1.96 million homes for sale to 2.00 million.  Over the quarter the inventory averaged a 4.6 month supply down from 4.9 months in the first quarter of 2014.  NAR says a supply of 6 to 7 months represents a healthy balance of supply between buyers and sellers.

"Homeowners throughout the country have enjoyed accumulating household wealth through the steady rise in home values in the past few years," says Yun. "However, some homeowners are hesitant to move-up and sell because they aren't confident they'll find another home to buy. This trend-in addition to subpar homebuilding activity-is leading to the ongoing inventory shortages and subsequent run-up in prices seen in many markets."

The highest prices were found among the usual suspects; San Jose where the median existing single-family price was $900,000; San Francisco, $748,300; Honolulu, $699,300; Anaheim-Santa Ana, Calif., $685,700; and San Diego, $510,300.

The lowest-cost metro areas in the first quarter were those around Youngstown, Ohio, $64,300; Cumberland, Maryland, $71,600; Rockfordand Decatur, Illinois, $78,600 and $82,200 respectively; and Toledo, $83,800.

Despite higher prices affordability improved slightly compared to Q1 2014.  NAR said this was enabled by lower interest rates and an uptick in the national family median income to $66,257. To purchase a single-family home at the national median price, a buyer making a 5 percent downpayment would need an income of $43,466, a 10 percent downpayment would require an income of $41,178, and $36,603 would be needed for a 20 percent downpayment.

Sales in the Northeast were down 11.2 percent quarter-over-quarter but were still 2.2 percent higher than a year earlier.  The median existing single-family home price in the region was $245,000 in the first quarter, up 2.4 percent from a year ago.

In the Midwest, existing-home sales declined 2.0 percent in the first quarter and 6.3 percent higher than a year ago. The median existing single-family home price increased year-over-year by 8.9 percent to $156,600.

Existing-home sales in the South were down one-half percentage point for the quarter but rose 7.8 percent from a year earlier. The median existing single-family home price was $182,300, up 8.2 percent on an annual basis. 

In the West, existing-home sales increased 1.5 percent in the first quarter and are 5.4 percent above a year ago. The region's median existing single-family home price increased 5.8 percent to $295,500.

Another measure of home prices FNC's Residential Price Index (RPI) released on Monday indicates that national residential property values (the Composite 100 index) increased 0.9 percent from February to March and 4.6% compared to March 2014.  FNC's 10-City index was up 0.6 in March and the 20- and 30 MSAs increased by about 0.9 percent.  None of the indices are seasonally adjusted and they do not includes distressed sales.