Sparse Listings Continue to Drive Home Prices

by devteam August 12th, 2015 | Share

There was an uptick in national existing home sales in thernsecond quarter of 2015 of 6.6 percent the National Association of Realtors® (NAR) said on Tuesday.  The increase in sales coupled with an insufficientrnsupply of homes drove home prices almost universally higher across majorrnmetropolitan areas. </p

The uptick in transactions brought thernseasonally adjusted rate of existing home sales to 5.30 million in the secondrnquarter from 4.97 million in the first quarter. rnSales were also 8.5 percent higher than the rate of 4.89 million in thernsecond quarter of 2014. </p

The national median existingrnsingle-family home price in the second quarter was $229,400, up 8.2 percentrn(from $212,000) year-over-year.  In thernfirst quarter the rate of increase year-over-year was 7.1 percent.</p

Ninety-three percent orrn163 of the 176 metropolitan statistical areas (MSAs) tracked by NAR saw pricernincreases during the second quarter when compared to the same period inrn2014.  The remaining 13 areas or 7rnpercent saw price declines.  During thernfirst quarter of 2015 85 percent of markets posted increases.</p

Price gains were in the double digits</bduring the second quarter in 19 percent or 34 of the MSAs.  While the big increases were more prevalentrnthan a year earlier when 11 percent had growth in excess of 9 percent there wasrna significant decline from the 51 areas with hikes of that size in Q1. </p

At the end of the second quarter, therernwere 2.30 million existing homes available for sale, slightly above the 2.29rnmillion homes for sale at the end of the second quarter in 2014. The averagernsupply during the second quarter was 5.1 months – down from 5.5 months a yearrnago.</p

Lawrence Yun, NAR chief economist, saysrnthe housing market has shifted into a higher gear in recent months.rn”Steady rent increases, the slow rise in mortgage rates and stronger localrnjob markets fueled demand throughout most of the country this spring,” hernsaid. “While this led to a boost in sales paces not seen since before therndownturn, overall supply failed to keep up and pushed prices higher in arnmajority of metro areas.”</p

Adds Yun, “With home prices andrnrents continuing to rise and wages showing only modest growth, decliningrnaffordability remains a hurdle for renters considering homeownership -rnespecially in higher-priced markets.”</p

The most expensive housing market inrnthe second quarter was San Jose where the median existing single-family pricernwas $980,000.  Earlier in the week FrankrnNothaft, Senior Economist at CoreLogic had noted that homes available for sale inrnSan Jose represented only a one month supply and that most of the homes soldrnthere in June were on the market for less than 10 days.  The remaining top five most expensive marketsrnwere San Francisco, $841,600; Anaheim-Santa Ana, $685,700; Honolulu, $698,600;rnand San Diego, $547,800.</p

At the other end of the spectrum were Cumberland,rnMaryland, where the median single-family home price was $82,400; Youngstown, $85,000;rnRockford ($94,700) and Decatur ($96,000), Illinois; and Elmira, New York, $98,300.</p

Metro area condominium and cooperativernprices – covering changes in 61 metro areas – showed the national medianrnexisting-condo price was $217,400 in the second quarter, up 3.1 percent fromrnthe second quarter of 2014 ($210,800). Fifty metro areas (82 percent) showedrngains in their median condo price from a year ago; 11 areas had declines.</p

“The ongoing rise in home valuesrnin recent years has greatly benefited homeowners by increasing their householdrnwealth,” says Yun. “In the meantime, inequality is growing in Americarnbecause the downward trend in the homeownership rate means these equity gainsrnare going to fewer households.”</p

Even though the national family medianrnincome ticked up slightly (to $66,637) in the second quarter from a year ago, risingrnhome prices weighed on affordability.  Tornpurchase a single-family home at the national median price, a buyer making a 5rnpercent downpayment would need an income of $49,195, a 10 percent downpaymentrnwould require an income of $46,605, and $41,427 would be needed for a 20rnpercent downpayment.</p

NAR President Chris Polychron saysrnRealtors are reporting strong competition and limited days on market forrnavailable homes – especially at the entry-level price range. “Buyersrnshould work with their Realtor to deploy a negotiation strategy that helpsrntheir offer stand out,” he said. “If a bidding war occurs, it’srnimportant for the buyer to stay patient and only counteroffer up to what he orrnshe can comfortably afford. It’s better to walk away and wait for the rightrnhome instead of being in a situation where one has purchased a home above theirrnmeans.</p

Existing-home sales in the Northeastrnincreased 10.3 percent in the second quarter and are 8.6 percent higher than arnyear earlier.  The median existingrnsingle-family home price was $269,300, up 5.2 percent on an annual basis. </p

In the Midwest, sales jumped 13.4rnpercent quarter-over-quarter and 12.7 year-over-year. The median existing pricernincreased 8.7 percent to $182,000 from the same quarter a year ago.</p

While sales moved 1.1 percent in thernSouth, NAR’s report indicated both a rise and a fall; we are unsure which isrncorrect.  It is clear that sales were up 6.3rnpercent from a year earlier.  The medianrnexisting single-family home price was $202,900, up 8.7 percent. </p

In the West, existing-home salesrnclimbed 8.1 percent in the second quarter and were above sales in the secondrnquarter of 2014 by an identical amount. The median existing single-family homernprice in the West increased to $325,200, up 9.6 percent from the second quarterrnof 2014.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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