Home-price growth continued to moderate in many metropolitan areas in the second quarter with national year-over-year price appreciation now at its slowest pace since 2012.
The National Association of Realtors, in its latest quarterly report, states that the median existing single-family home price increased in 71% of measured markets, with 122 out of 173 metropolitan statistical areas showing gains based on closings in the second quarter compared with the second quarter of 2013. Forty-seven areas (27%) recorded lower median prices from a year earlier.
There were fewer rising markets in the second quarter compared to the first quarter, when price increases were recorded in 74% of metro areas. Furthermore, 19 areas in the second quarter (11%) had double-digit increases, a sharp decrease from the 37 areas last quarter and the overall average of 43 areas since the second quarter of 2013.
Lawrence Yun, NAR chief economist, said price increases are balancing out to the benefit for both buyers and sellers.
National median home prices began their most recent rise during the first quarter of 2012 but had climbed to unsustainable levels given the current pace of inflation and wage growth," he said.
"At this slower but healthier rate, homeowners can continue steadily building equity," he added. "Meanwhile, for buyers, increased supply with moderate price gains is giving them better opportunities to choose."
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). The median price during the first quarter of 2014 rose 8.3% from a year earlier.
Yun added that despite the stabilization in price growth, sharp increases still exist in some markets and are impacting sales, notably 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," he said.
Total existing-home sales, including single-family and condo, increased 5.8% to a seasonally adjusted annual rate of 4.87 million in the second quarter from 4.60 million in the first quarter, but are 4.5% below the 5.10 million pace during the second quarter of 2013.
Distressed homes, a category that includes foreclosures and short sales, generally sold at discount and accounted for 12% of second quarter sales, down from 17% a year ago.
"Fewer distressed sales will help diminish appraisal problems," Yun said.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell each month during the second quarter to an overall average rate of 4.23%, down from 4.36% during the first quarter of the year. These mortgages were 3.70% in the second quarter of 2013.
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. To purchase a single-family home at the national median price, a buyer making a 5% down payment would need an income of $47,816, a 10% down payment would require an income of $45,299, and $40,266 would be needed for a 20% down payment.
Total housing inventory showed much-needed improvement at the end of the second quarter at 2.30 million existing homes available for sale, which is 6.5% higher than a year ago. The average supply during the quarter was 5.6 months; it was 5.1 months in the second quarter of 2013. A supply of 6 to 7 months represents a rough balance between buyers and sellers.
NAR President Steve Brown, co-owner of Irongate, Inc., Realtors in Dayton, Ohio, said even with the increase in supply, Realtors across the country are reporting that properties are selling faster than earlier in the year.
"The improving economy and lower interest rates are increasing the pool of interested buyers," he said. "On the contrary, competition remains tight and all-cash offers are still a common occurrence. This inevitably is causing hesitation for some first-time buyers, who are more likely to have lower down payments and need to secure financing amidst tight credit conditions."
Metro area condominium and cooperative , covering changes in 62 metro areas, showed the national median existing-condo price was $211,100 in the second quarter, 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.
The five most expensive housing markets in the second quarter were the San Jose metro area, where the median existing single-family price was $899,500; San Francisco, $769,600; Anaheim-Santa Ana, $691,900; Honolulu, $678,500; and San Diego, $504,200.
The five lowest-cost metro areas in the second quarter were Youngstown-Warren-Boardman, Ohio, where the median single-family home price was $78,600; Rockford, Ill., $85,300; Elmira, N.Y., $87,800; Decatur, Ill., $90,900; and Toledo, Ohio, $95,900.
Regionally, total existing-home sales in the Northeast rose 5.1% in the second quarter but are 4.1% below the second quarter of 2013. The median existing single-family home price in the Northeast was $255,500 in the second quarter, down slightly (0.9%) from a year ago.
In the Midwest, existing-home sales increased 9.4% in the second quarter but remain 6.1% below a year ago. The median existing single-family home price in the Midwest increased 4.4% to $167,600 in the second quarter from the same quarter a year ago.
Existing-home sales in the South climbed 3.4% in the second quarter but are 1.0% below the second quarter of 2013. The median existing single-family home price in the South was $187,300 in the second quarter, 3.7% above a year earlier.
In the West, existing-home sales rose 7.1% in the second quarter but remain 9.0% below a year ago. The median existing single-family home price in the West jumped 7.3% to $297,400 in the second quarter from the second quarter of a year ago. n