Metropolitan area median home prices continued to rise in the first quarter, with the national gain showing the best year-over-year performance in more than seven years, according to the latest quarterly report by the National Association of REALTORS®. A companion breakout of income requirements to purchase a median-priced home on a metro basis shows the typical buyer earns roughly double the income needed to buy a home in his or her area.
The median existing single-family home price rose in 133 out of 150 metropolitan statistical areas (MSAs) based on closings in the first quarter of 2013 compared with first quarter last year, while 17 areas had price declines. In the fourth quarter of 2012, a comparable 133 areas showed price increases from a year earlier, greatly improved from the first quarter of 2012 when prices in only 74 metros were up.
Lawrence Yun, NAR chief economist, said many areas are experiencing a seller’s market. “The supply/demand balance is clearly tilted toward sellers in a good portion of the country,” he said. “Inventory conditions are expected to remain fairly constrained this year, so overall price increases should be well above the historic gain of one-to-two percentage points above the rate of inflation. If home builders can continue to ramp up production, then home price growth is expected to moderate in 2014.”
At the end of the first quarter there were 1.93 million existing homes available for sale, which is 16.8 percent below the close of the first quarter of 2012, when 2.32 million homes were on the market.
The national median existing single-family home price was $176,600 in the first quarter, up 11.3 percent from $158,600 in the first quarter of 2012. This is the strongest year-over-year price increase since the fourth quarter of 2005 when the median price jumped 13.6 percent. In the fourth quarter of 2012 the median price rose 10.0 percent from a year earlier.
“Some of the previously hard-hit markets like Phoenix, Sacramento and Miami continue to experience a dramatic turnaround, while a new set of areas like Atlanta, Minneapolis and Seattle have begun to show strong signs of upward momentum,” Yun said.
The median price is where half of the homes sold for more and half sold for less. However, some of the elevated median prices reflect a shrinking market share of lower priced homes and greater activity in upper priced transactions. Distressed homes – foreclosures and short sales generally sold at discounts of up to 20 percent – accounted for 23 percent of first quarter sales, down from 32 percent a year ago.
Total existing-home sales, including single-family and condo, edged up 0.8 percent to a seasonally adjusted annual rate of 4.94 million in the first quarter from 4.90 million in the fourth quarter, and were 9.8 percent above the 4.50 million pace during the first quarter of 2012. Sales were at the highest level since the fourth quarter of 2009, when they reached 4.95 million as buyers responded to tax incentives.
According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged 3.50 percent in the first quarter, up from a record low 3.36 percent in the fourth quarter; it was 3.92 percent in the first quarter of 2012.
NAR President Gary Thomas said conditions remain favorable for buyers. “Even with rising home prices, there is still plenty of buying power in the market,” he said. “Historically low mortgage interest rates and home prices that remain well below their peak mean most buyers can purchase well within their means, assuming they meet ongoing stringent credit standards.”
A separate breakout of qualifying incomes to purchase a median-priced existing single-family home on a metropolitan area basis demonstrates ample buying power in the current market. Income requirements are determined using several scenarios on downpayment percentages and assume 25 percent of gross income devoted to mortgage principal and interest at a mortgage interest rate of 3.5 percent.
The national median family income was $62,200 in the first quarter. However, to purchase a home at the national median price, a buyer making a 5 percent downpayment would only need an income of $36,500. With a 10 percent downpayment the required income would be $34,600, while with 20 percent down, the necessary income is $30,700.
In the condo sector, metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $172,400 in the first quarter, up 10.4 percent from the first quarter of 2012. Thirty-nine metros showed increases in their median condo price from a year ago and 15 areas had declines.
Regionally, existing-home sales in the Northeast rose 4.4 percent in the first quarter and are 9.1 percent above the first quarter of 2012. The median existing single-family home price in the Northeast rose 2.9 percent to $234,000 in the first quarter from a year ago.
In the Midwest, existing-home sales increased 1.2 percent in the first quarter and are 15.0 percent higher than a year ago. The median existing single-family home price in the Midwest increased 8.2 percent to $135,100 in the first quarter from the same quarter last year.
Existing-home sales in the South edged up 0.7 percent in the first quarter and are 13.3 percent above the first quarter of 2012. The regional median existing single-family home price was $156,800 in the first quarter, up 9.3 percent from a year earlier.
In the West, which is the region most impacted by limited housing supplies, existing-home sales slipped 1.1 percent in the first quarter but are 0.6 percent above a year ago. The median existing single-family home price in the West jumped 24.4 percent to $247,800 in the first quarter from the first quarter of 2012.