Based on the latest quarterly report by the National Association of Realtors, an uptick in residential sales activity amidst meager supply levels upheld the trend of home price gains in an overwhelming majority of metro areas during the first quarter of the year.
The median existing single-family home price increased in 87 percent of measured markets, with 154 out of 178 metropolitan statistical areas (MSAs) showing gains based on closed sales in the first quarter compared with the first quarter of 2015. Twenty-four areas (13 percent) recorded lower median prices from a year earlier.
There were more rising markets in the first quarter compared to the fourth quarter of 2015, when price gains were recorded in 81 percent of metro areas. Twenty-eight metro areas in the first quarter (16 percent) experienced double-digit increases - a slight decrease from the 30 metro areas in the fourth quarter of 2015; fifty-one metro areas (28 percent) experienced double-digit increases in the first quarter of last year.
Lawrence Yun, NAR chief economist, says home prices chugged along at a robust pace in most metro areas during the first three months of 2016. "The solid run of sustained job creation and attractive mortgage rates below 4 percent spurred steady demand for home purchases in many local markets," he said. "Unfortunately, sales were somewhat subdued by supply and demand imbalances and broadly rising prices above wage growth. As a result, the path to homeownership so far this year remains strenuous for a segment of prospective buyers in the most competitive areas."
The national median existing single-family home price in the first quarter was $217,600, up 6.3 percent from the first quarter of 2015 ($204,700). The median price during the fourth quarter of 2015 increased 6.7 percent from the fourth quarter of 2014.
Total existing-home sales, including single family and condo, rose 1.7 percent to a seasonally adjusted annual rate of 5.29 million in the first quarter from 5.20 million in the fourth quarter of 2015, and are 4.8 percent higher than the 5.05 million pace during the first quarter of 2015.
"In spite of deficient supply levels, stock market volatility and the paltry economic growth seen so far this year, the housing market did show resilience and had its best first quarter of existing-sales since 2007 (5.66 million)," adds Yun. "The demand for buying is there, but unless the stock of new and existing-homes for sale increases significantly - especially in several markets in the West - the housing market will struggle to reach its full potential."
At the end of the first quarter, there were 1.98 million existing homes available for sale, which was below the 2.01 million homes for sale at the end of the first quarter in 2015. The average supply during the first quarter was 4.3 months - down from 4.6 months a year ago.
Despite a small increase in the national family median income ($68,431), climbing home prices and slightly higher mortgage rates caused affordability to decline in the first quarter compared to the first quarter of last year. To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $47,819, a 10 percent down payment would require an income of $45,302, and $40,268 would be needed for a 20 percent down payment.
"Current homeowners in many metro areas - especially those who purchased a home immediately after the downturn - have enjoyed a sizeable boost in housing equity and household wealth in recent years," adds Yun. "At a time of stagnant wage growth and mounting rent increases, the same cannot be said for renters. Their inability to reach the market because of affordability and supply restrictions is contributing to rising wealth inequality in the U.S."
The five most expensive housing markets in the first quarter were the San Jose, Calif., metro area, where the median existing single-family price was $970,000; San Francisco, $770,300; Honolulu, $721,400; Anaheim-Santa Ana, Calif., $713,700; and San Diego, $554,300.
The five lowest-cost metro areas in the first quarter were Cumberland, Md., $67,400; Youngstown-Warren-Boardman, Ohio, $77,500; Decatur, Ill., $83,300; Wichita Falls, Texas, $95,200, and Rockford, Ill., $95,800.
Metro area condominium and cooperative prices - covering changes in 60 metro areas - showed the national median existing-condo price was $204,700 in the first quarter, up 5.8 percent from the first quarter of 2015 ($193,500). Forty-four metro areas (73 percent) showed gains in their median condo price from a year ago; 16 areas had declines.
Total existing-home sales in the Northeast decreased 4.1 percent in the first quarter but are 11.2 percent above the first quarter of 2015. The median existing single-family home price in the Northeast was $249,400 in the first quarter, up 1.8 percent from a year ago.
In the Midwest, existing-home sales were unchanged in the first quarter (compared to the fourth quarter) but are 6.1 percent higher than a year ago. The median existing single-family home price in the Midwest increased 7.3 percent to $167,900 in the first quarter from the same quarter a year ago.
Existing-home sales in the South rose 5.2 percent in the first quarter and are 3.6 percent higher than the first quarter of 2015. The median existing single-family home price in the South was $192,100 in the first quarter, 5.8 percent above a year earlier.
In the West, existing-home sales climbed 0.9 percent in the first quarter and are 2.1 percent above a year ago. The median existing single-family home price in the West increased 7.1 percent to $315,900 in the first quarter from the first quarter of 2015.