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Home Prices Grow in U.S.; Housing Affordability Suffers

Home Prices Grow in U.S.; Housing Affordability Suffers

Metro areas in the U.S. reported strong home price growth during the final quarter of 2013, while some markets are facing home affordability issues, according to the National Association of Realtors. 

The median existing single-family home price increased in 73 percent of U.S. measured markets, with 119 of 164 metro area reporting price gains in the fourth quarter, compared to a year ago. 

Forty-two areas had double-digit increases, two were unchanged and 43 had lower median prices.

Although home prices grew, there were fewer rising markets in the final quarter, compared to the third quarter when 88 percent of metro areas showed yearly price gains.

Rising home prices are good signs for the recovering market, but it is beginning to hamper housing affordability. 

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Lawrence Yun

"The vast majority of homeowners have seen significant gains in equity over the past two years, which is helping the economy through increased consumer spending," Lawrence Yun, NAR chief economist, said in the report. "At the same time, home prices have been rising faster than incomes, while mortgage interest rates are above the record lows of a year ago."

The five most expensive housing markets in the fourth quarter were the San Jose, Calif., metro area, with a median existing single-family price of $775,000; San Francisco, $682,400; Honolulu, $670,800; Anaheim-Santa Ana, Calif., $666,300; and San Diego, with a median price of $476,800. 

On the other hand, the five lowest-cost metro areas were Toledo, Ohio, with a median single-family price of $80,500; Rockford, Ill., $81,400; Cumberland, Md., at $89,500; Elmira, N.Y., $99,500; and South Bend, Ind., with a median price of $101,100.

The nation median existing single-family home price was $196,900 in the fourth quarter, a 10.1 percent increase from $178,900 from a year ago. The increase was less than the 12.5 percent yearly rise in the third quarter. 

A report last week from CoreLogic showed national home prices increased in December year-over-over for the 22nd consecutive month. 

Tight housing supplies in many areas around the country are contributing to the double-digit price growth. At year-end there were 1.86 million existing homes available for sale, slightly higher than a year prior.  

In 2013, housing starts totaled 924,000, higher than the 2012 figure of 780,600. However, it was well below the historic average of 1.5 million units that typically are needed, NAR reports. 

"Added housing supply will help moderate price growth this year, and should help to stem erosion in affordability, but mortgage interest rates are projected to rise above 5 percent by the end of the year," Mr. Yun said.

The total number of existing-home sales -- single-family and condo -- fell 7.8 percent to a seasonally adjusted annual rate of 4.94 million in the final quarter, from 5.36 million the previous quarter. They were, however, 0.8 percent higher than the 4.90 million sold in the fourth quarter of 2012.

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