According to the National Association of Realtors, an encouraging lift-off in existing-home sales continues amidst ongoing inventory shortages kept home prices rising in most of the country during the third quarter, but overall price appreciation slowed to a healthier pace.
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 closings in the third quarter compared with the third quarter of 2014. Twenty-four areas (13 percent) recorded lower median prices from a year earlier.
There were slightly fewer rising markets in the third quarter compared to the second quarter, when price gains were recorded in 93 percent of metro areas. Twenty-one metro areas in the third quarter (12 percent) experienced double-digit increases, a decline from the 34 metro areas in the second quarter. Sixteen metro areas (9 percent) experienced double-digit increases in the third quarter of 2014.
Lawrence Yun, NAR chief economist, says there's no question the housing market had its best quarter in nearly a decade. "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," he said. "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 third quarter of 2014 ($217,100). The median price during the second quarter of this year increased 8.2 percent from a year earlier.
Total existing-home sales, including single family and condo, increased 3.4 percent to a seasonally adjusted annual rate of 5.48 million in the third quarter from 5.30 million in the second quarter, and are 8.3 percent higher than the 5.06 million pace during the third quarter of 2014.
Yun says sales had the potential to be even higher last 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."
The five most expensive housing markets in the third quarter were the San Jose, Calif., metro area, where the median existing single-family price was $965,000; San Francisco, $809,400; Anaheim-Santa Ana, Calif., $715,300; Honolulu, $714,000; and San Diego, $554,400.
The five lowest-cost metro areas in the third quarter were Cumberland, Md., where the median single-family home price was $82,400; Youngstown-Warren-Boardman, Ohio, $90,700; Decatur, Ill., $101,400; Rockford, Ill., $102,800; and Elmira, N.Y., $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."
Metro area condominium and cooperative prices - covering changes in 62 metro areas - showed the national median existing-condo price 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, which is below the 2.28 million homes for sale at the end of the third quarter in 2014. The average supply during the third quarter was 4.9 months - down from 5.5 months a year ago.
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."
Rising home prices, despite an increase in the national family median income ($67,723), slightly decreased affordability in the third quarter compared to the third 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 $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 existing-home sales in the Northeast jumped 6.4 percent in the third quarter and are 9.1 percent above the third quarter of 2014. The median existing single-family home price in the Northeast was $269,400 in the third quarter, up 3.5 percent from a year ago.
In the Midwest, existing-home sales rose 2.1 percent in the third quarter and are 9.0 percent higher than a year ago. The median existing single-family home price in the Midwest increased 4.8 percent to $181,100 in the third quarter from the same quarter a year ago.
Existing-home sales in the South climbed 3.0 percent in the third quarter and are 6.9 percent above the third quarter of 2014. The median existing single-family home price in the South was $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 in the third quarter from the third quarter of 2014.