Homes Sales still Strong but Appreciation Slows

The National Association of Realtors® (NAR) is calling the third quarter of 2015 unquestionably the best quarter for the housing market in a decade.  Existing home sales and the continuing shortages of product kept home prices rising in most of the country.

Still, overall price appreciation did slow to what NAR calls a healthier pace.  The median existing single-family home price increased in 154 of the 178 metropolitan statistical areas (MSAs) tracked by the association (87 percent) compared to median prices in the third quarter of 2014.  Twenty-four MSAs (13 percent) recorded an annual decline. In the second quarter 93 percent of metro areas saw median price increases.

The size of the gains also moderated.  In the second quarter 34 MSAs posted double digit increases but only 21 did so in the third quarter.  Still that was five more than hit double digits in the third quarter of 2014.

Lawrence Yun, NAR chief economist, said, "The demand for buying picked up speed in many metro areas during the summer as more households entered the market, encouraged by favorable mortgage rates and improving local economies.  While price growth still teetered near or above unhealthy levels in some markets, the good news is that there was some moderation despite the stronger pace of sales."

The national median existing single-family home price in the third quarter was $229,000, up 5.5 percent from the median of $217,100 a year earlier. Annual appreciation in the second quarter was 8.2 percent.

Existing home sales were at a seasonally adjusted annual rate of 5.48 million in the third quarter, up 3.4 percent from the second quarter and 8.3 percent from the 5.06 million pace of a year earlier.  Yun says sales might have been even higher in the third quarter given the decline in mortgage rates and favorable economic conditions. "Unfortunately, the lack of any meaningful gains in housing supply pushed prices in some areas above what some potential buyers - especially first-time buyers - are able to afford."

All but one of the five most expensive housing markets in the third quarter were in California; the San Jose MSA with a median existing single-family price of  $965,000; San Francisco, $809,400; Anaheim-Santa Ana, $715,300; and San Diego, $554,400. Honolulu was the fourth most expensive market at $714,000;

At the other end of the cost spectrum were Cumberland, Maryland, at $82,400; Youngstown-Warren-Boardman, $90,700; Decatur, and Rockford, Illinois at $101,400 and $102,800 respectively; and Elmira, New York, $108,800.

"Many of the metro areas with the fastest price appreciation over the past year were in the South - particularly in Florida," says Yun. "A combination of solid job gains, above average shares of vacation and foreign buyers and little new construction being added was behind these areas' faster price growth."

The median existing condo/co-op price in the 62 metro areas tracked was $215,200 in the third quarter, up 2.0 percent from the third quarter of 2014 ($211,000). Forty-four metro areas (71 percent) showed gains in their median condo price from a year ago; 18 areas had declines.

At the end of the third quarter, there were 2.21 million existing homes available for sale, an average supply of 4.9 months.  At the end of the third quarter a year ago there were 2.28 million available homes, a 5.5 month supply.

NAR President Chris Polychron says the overall pool of potential buyers still outweighs what's available for sale in several markets this fall. "Realtors® are still reporting that many homes are going under contract more quickly than what's typical this time of year," he said. "While this is certainly beneficial to homeowners looking to sell, some are still reluctant to list out of concerns they'll have limited time and choices during their own home search."

Despite an increase in the national family median income to $67,723, rising home prices made houses slightly less affordable than a year ago.  To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $50,324, a 10 percent down payment would require an income of $47,675, and $42,378 would be needed for a 20 percent down payment.

Total home sales and median prices both increased in all four regions of the country on an annual basis and sales were also up quarter-over-quarter. In the Northeast sales increased 6.4 percent from Q2 and 9.1 percent from a year earlier.  The median price rose 3.5 percent on an annual basis in the Northeast to $269,400.

Sales rose in the Midwest, by 2.1 percent for the quarter and are up 9.0 percent year-over-year. The median existing single-family home price in the Midwest was $181,100, a 4.8 percent gain.

Existing-home sales in the South climbed 3.0 percent compared to the previous quarter and 6.9 percent on an annual basis.  The median price $200,700 in the third quarter, 6.0 percent above a year earlier.

In the West, existing-home sales increased 3.9 percent in the third quarter and are 9.7 percent above a year ago. The median existing single-family home price in the West increased 7.3 percent to $324,300.