The rate at which home prices are rising has tapered off in many markets, but that’s not necessarily bad news for homeowners. A slow, steady climb in home prices indicates a healthy market keeping pace with inflation.
The national median existing single-family home price in the second quarter was $212,400, up 4.4% from the second quarter of 2013 ($203,400), NATIONAL ASSOCIATION OF REALTORS’® data show. The median price is where half the homes sell for more and half sell for less.
Home prices rose in 122 out of the 173 markets NAR tracks and fell in only 47 areas compared with year-ago prices. Fewer markets saw rising prices in the second quarter compared with the first. Prices were rising at double-digits in only 19 markets, a sharp decrease from the 37 markets reporting double-digit increases during the first quarter of this year.
Having home prices rise more slowly benefits both buyers and sellers. “At this slower but healthier rate, homeowners can continue steadily building equity,” said NAR Chief Economist Lawrence Yun. “Meanwhile, for buyers, increased supply with moderate price gains is giving them better opportunities to choose.”
One factor that contributes to rising prices is a drop in the number of distressed sellers forced into foreclosure or short sales (where you have to sell your home for less than what you owe on the mortgage). Distressed homes sell at a discount, which can lower the value of similar homes nearby. Only 12% of second-quarter home sales were distressed, down from 17% a year ago.
Despite the stabilization of home price growth nationally, sharp increases still exist in some markets. In those markets, quickly rising home prices have affected sales, especially on the West Coast where inventory shortages are more prevalent.
“New construction for ownership housing and rentals is needed to alleviate price and rent pressures and accommodate their growing populations,” Yun said.
5 most-expensive markets in the second quarter:
1. San Jose, Calif.: $899,500
2. San Francisco: $769,600
3. Anaheim-Santa Ana, Calif.: $691,900
4. Honolulu: $678,500
5. San Diego: $504,200
5 lowest-cost housing markets in the second quarter:
1. Youngstown-Warren-Boardman, Ohio: $78,600
2. Rockford, Ill.: $85,300
3. Elmira, N.Y.: $87,800
4. Decatur, Ill.: $90,900
5. Toledo, Ohio: $95,900
Buying Power Up
Lower interest rates and a slight rise (0.7%) in the national family median income ($64,751) led to improved buying power in a majority of metro areas during the second quarter.
Scenarios for affording a home at the national median price:
- With a 5% downpayment, a family needs $47,816 in annual income.
- With 10% down, it takes $45,299 in income.
- With 20% down, the necessary income falls to $40,266.
Many markets are becoming more balanced between buyers and sellers. The number of homes for sale is up 6.5% from a year ago. That’s a 5.6-month supply at the current sales pace. A supply of 6 to 7 months represents a rough balance between buyers and sellers.
Even with the increase in supply, REALTORS® across the country are reporting that properties are selling faster than earlier in the year, said NAR President Steve Brown.
Condo and Co-op Prices
Nationally, the median condominium and cooperative price hit $211,100 in the second quarter. That’s up 5.9% from the second quarter of 2013 ($199,300). Forty-seven metro areas (76%) showed increases in their median condo price from a year ago; 15 areas had declines.