Home Prices Rise in 93% of Metro Areas

In the latest quarterly report by the National Association of Realtors, home prices in the vast majority of metro areas were found to have continued their upward trajectory, thanks in part to an ongoing lack of supply. 163 of the 176 (93%) metropolitan statistical areas (MSAs) examined showed gains in their median existing single-family home price in the second quarter of 2015 compared to the second quarter of 2014. Conversely, just thirteen areas (7%) recorded lower median prices from a year earlier.

At 93%, the proportion of markets experiencing home price increases was significantly higher than the 85% seen in the first quarter of the year. However, there is cause to believe that these increases may be slowing; while thirty-four metro areas in the second quarter (19 percent) experienced double-digit increases, this represented a decline from the 51 metro areas in the first quarter (29%). This level was still higher than the same time last year, when nineteen metro areas (11 percent) experienced double-digit increases.

Lawrence Yun, NAR chief economist, believes the rapidly rising prices can be attributed to supply shortcomings. "Steady rent increases, the slow rise in mortgage rates and stronger local job markets fueled demand throughout most of the country this spring," he said. "While this led to a boost in sales paces not seen since before the downturn, overall supply failed to keep up and pushed prices higher in a majority of metro areas."

Yun goes on to caution that, "With home prices and rents continuing to rise and wages showing only modest growth, declining affordability remains a hurdle for renters considering homeownership — especially in higher-priced markets."

The national median existing single-family home price, which stood at $212,000 in the second quarter of 2014, rose this year to $229,400, a gain of 8.2 percent. The median price during the first quarter of this year also increased, up 7.1 percent from a year earlier.

The most expensive housing market in the second quarter was the San Jose, California MSA, where the median existing single-family price was $980,000. Rounding out the top five were San Francisco at $841,600; Anaheim-Santa Ana, California at $685,700; Honolulu at $698,600; and San Diego at $547,800.

The five lowest-cost metro areas in the second quarter were Cumberland, Maryland, where the median single-family home price was $82,400; Youngstown-Warren-Boardman, Ohio at $85,000; Rockford, Illinois at $94,700; Decatur, Illinois at $96,000; and Elmira, N.Y. at $98,300.

Total existing-home sales, including single family and condo, also increased in the second quarter, registering a 6.6 percent gain to a seasonally adjusted annual rate of 5.30 million from 4.97 million in the first quarter. In addition, these sales are 8.5 percent higher than the 4.89 million pace during the second quarter of 2014. At the same time, the number of existing-homes available for sale remained relatively flat, changing from 2.29 million homes at the end of the second quarter in 2014 to 2.30 million existing homes available for sale in 2015. Given the rising sale rates, this translates to a decrease in the average supply during the second quarter of 2015 (5.1 months, down from 5.5 months a year ago).

NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says realtors are reporting strong competition and limited days on market for available homes. "Buyers should work with their realtor to deploy a negotiation strategy that helps their offer stand out," he said. "If a bidding war occurs, it's important for the buyer to stay patient and only counteroffer up to what he or she can comfortably afford. It's better to walk away and wait for the right home instead of being in a situation where one has purchased a home above their means."

The Midwest experienced the largest gains in existing-home sales, jumping 13.4 percent in the second quarter and 12.7 percent from a year ago. Median existing single-family home prices in the West have experienced the largest year-over-year gains (9.6%), rising to a nation-high $325,200.

Source: Home Prices Rise in Nearly All Metro Areas in Second Quarter

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