Photo credit: Michael Patrick
The median house price increased in the third quarter of
2012 in 8 out of 10 metros, according to the National Association of Realtors.
The median existing single-family home price rose in 120 out
of 149 metropolitan statistical areas1 (MSAs) based on closings in the third
quarter compared with same quarter in 2011, while 29 areas had price declines.
In the second quarter 110 areas showed increases from a year earlier, while in
the third quarter of 2011 only 39 metros were up.
Lawrence Yun, NAR chief economist, said the growth in home
prices gets down to supply and demand.
"Housing inventories have been gradually trending down
from a record set in the summer of 2007," he said. "Earlier this
year, a broad equilibrium began to develop in most areas between home buyers
and sellers, which led to a sustained upturn in home prices. We expect fairly
normal appreciation patterns in 2013, but there is a risk of price acceleration
if builders are unable to increase supply to meet the needs of our growing
population and household formation."
The national median existing single-family home price was
$186,100 in the third quarter, up 7.6 percent from $173,000 in the third
quarter of 2011, which is the strongest year-over-year price increase since the
first quarter of 2006 when the median price rose 9.4 percent. In the second
quarter the price increased 7.2 percent from a year earlier.
The median price is where half of the homes sold for more
and half sold for less; medians are more typical than average prices, which are
skewed higher by a relatively small share of upper-end transactions.
Some of the price gain resulted from a smaller share of
distressed home sales in the market, but the higher prices significantly
reflect a market recovery. Distressed homes2 - foreclosures and short sales
which generally sell at deep discounts - accounted for 23 percent of second
quarter sales, down from 30 percent a year ago.
A separate breakout of income requirements to buy a home on
a metro area basis shows buyers in the vast majority of areas had ample income
in the third quarter, assuming they could meet stringent mortgage credit
standards.
Total existing-home sales,3 including single-family and
condo, rose 3.2 percent to a seasonally adjusted annual rate of 4.68 million in
the third quarter from 4.54 million in the second quarter, and were 10.3
percent higher than the 4.25 million pace during the third quarter of 2011.
At the end of the third quarter 2.32 million existing homes
were available for sale, which is 20.0 percent below the close of the third
quarter of 2011 when 2.90 million homes were on the market.
According to Freddie Mac, the national commitment rate on a
30-year conventional fixed-rate mortgage averaged a record low 3.54 percent in
the third quarter, down from 3.80 percent in the second quarter and 4.31
percent in the third quarter of 2011.
NAR President Moe Veissi, broker-owner of Veissi &
Associates Inc., in Miami, said affordability conditions are a big factor in
rising sales. "Historically low mortgage interest rates are encouraging
many buyers who were on the sidelines," he said. "Sales this year are
notably higher than the levels seen in 2008 through 2011, so we're clearly in a
recovery phase with rising sales, declining inventory and rising prices. Of
course the recovery would be stronger and more stable if we could return to
safe but sensible mortgage underwriting standards."
A breakout of incomes required to purchase a median-priced
existing single-family home by metro area shows the typical buyer had more
income than necessary in the third quarter. Income amounts are determined using
several downpayment percentages, assuming a mortgage interest rate of 4 percent
and 25 percent of gross income devoted to mortgage principal and interest.
The national median family income4 was $61,700 in the third
quarter. However, to purchase a home at the national median price, a buyer making
a 5 percent downpayment would only need an income of $40,900. With a 10 percent
downpayment the required income is $38,700, while with 20 percent down the
necessary income is $34,400.
In the condo sector, metro area condominium and cooperative
prices - covering changes in 54 metro areas - showed the national median
existing-condo price was $180,800 in the third quarter, up 7.7 percent from the
third quarter of 2011. Thirty-three metros showed increases in their median
condo price from a year ago and 21 areas had declines.
First-time buyers purchased 32 percent of all homes in the
third quarter, down from 34 percent in the second quarter; they were 32 percent
in the third quarter of 2011.
The share of all-cash home purchases was 27 percent in the
third quarter, down from 29 percent in the second quarter and 29 percent in the
third quarter of 2011. Investors, who make up the bulk of cash purchasers and
compete with first-time buyers, accounted for 17 percent of all transactions in
the third quarter, down from 19 percent in the second quarter and 20 percent a
year ago.
"The modest decline in first-time buyers and investors
shows the impact of limited inventory in the lower price ranges from a
shrinking share of distressed homes, which are popular with both of these
groups," Yun explained.
Regionally, existing-home sales in the Northeast increased
1.7 percent in the third quarter and are 9.8 percent above the third quarter of
2011. The median existing single-family home price in the Northeast slipped 0.3
percent to $246,900 in the third quarter from a year ago.
In the Midwest, existing-home sales rose 5.2 percent in the
third quarter and are 17.8 percent higher than a year ago. The median existing
single-family home price in the Midwest increased 4.2 percent to $151,100 in
the third quarter from the same quarter in 2011.
Existing-home sales in the South increased 5.4 percent in
the third quarter and are 11.7 percent above the third quarter of 2011. The
regional median existing single-family home price rose 5.7 percent to $165,400
in the third quarter from a year earlier.
In the West, existing-home sales slipped 1.2 percent in the
third quarter due to limited supplies, but are 2.1 percent higher than a year
ago. With the tight inventory, the median existing single-family home price in
the West surged 20.2 percent to $247,400 in the third quarter from the third
quarter of 2011.