Archive for February 9th, 2012
Article by: National Association of REALTORS®
Fourth Quarter Metro Area Home Prices Boost Affordability, Sales Improving
Housing affordability conditions improved in most metropolitan areas from softer existing-home prices and record-low mortgage interest rates in the fourth quarter, with rising sales and lower inventory creating more balanced conditions, according to the latest quarterly report by the National Association of REALTORS®.
Introduced with this release is a new annual metro-level housing affordability index, with historically favorable conditions dominating across the country.
The median existing single-family home price rose in 29 out of 149 metropolitan statistical areas in the fourth quarter from a year earlier; two were unchanged and 118 areas had price declines.
Lawrence Yun, NAR chief economist, said the figures reflect greater home sales activity at lower price points. “Sales have risen strongly in lower price ranges from one year ago, while sales at the upper end remain sluggish,” he said. “More importantly, we’re seeing a consistent trend of declining inventory, which means supply and demand conditions are becoming more balanced in more areas, which will help stabilize home prices.”
The national median existing single-family home price was $163,500 in the fourth quarter, down 4.2 percent from $170,600 in the fourth quarter of 2010. The median is where half sold for more and half sold for less. Distressed homes — foreclosures and short sales which sold at discounts averaging 15 to 20 percent — accounted for 30 percent of fourth quarter sales; they were 34 percent a year earlier.
Median price measurement reflects the types of homes that are selling during the quarter and can be skewed at times because the level of distressed sales, which artificially depress median prices, can vary notably in given markets. Annual price measures, also reported today, generally smooth out any quarterly swings.
“Broadly speaking, the very middle of the country, from the Dakotas and Nebraska to Oklahoma and Texas, has experienced very stable home price trends because of stronger job creation in those areas,” Yun said.
Total existing-home sales, including single-family homes and condos, increased 5.9 percent to a seasonally adjusted annual rate of 4.42 million in the fourth quarter from 4.17 million in the third quarter, and were 9.2 percent above the 4.04 million pace during the fourth quarter of 2010. All regions rose from the third quarter and from a year ago.
At the end of the fourth quarter there were 2.38 million existing homes available for sale, which is 21.2 percent lower than the close of the fourth quarter of 2010, when there were 3.02 million homes on the market.
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said market conditions vary widely around the country. “Even with record high housing affordability conditions, all real estate is local,” he said. Both buyers and sellers need to be aware of what works in their local market, and REALTORS® are the best resource because they have unparalleled knowledge of local market conditions and options.”
NAR’s national Housing Affordability Index rose to a record high 184.5 in 2011, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power; recordkeeping began in 1970.
An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent down payment and 25 percent of gross income devoted to mortgage principal and interest payments. For first-time buyers making small down payments, the affordability levels are relatively lower.
Metro areas with the greatest housing affordability conditions in 2011 include the Detroit-Warren-Livonia area of Michigan, with an index of 383.4; Toledo, Ohio, at 242.9; and Decatur, Ill., at 236.8. Only 24 out of 152 metros measured had an affordability index below 100 in 2011.
“Clearly, the Midwest has the greatest concentration of areas where home buyers have the strongest purchasing power, followed by the South,” Yun said. “Metros on the West Coast and along the Northeastern seaboard have generally higher-priced homes, which account for lower affordability.”
Between 2010 and 2011, in markets where comparisons are available, all but 2 out of 148 areas showed improvement in housing affordability, and 69 MSAs had double-digit increases in affordability conditions.
The share of all-cash home purchases in the fourth quarter was 29 percent, unchanged from the third quarter; they were 30 percent in the fourth quarter of 2010. Investors, who are drawn by bargain prices and who account for the bulk of cash purchases, accounted for 19 percent of transactions in the third quarter; they were 20 percent in the third quarter and 19 percent a year ago.
First-time buyers purchased 33 percent of homes in the fourth quarter; they were 32 percent in both the third quarter and the fourth quarter of 2010.
In the condo sector, metro area condominium and cooperative prices — covering changes in 54 metro areas — showed the national median existing-condo price was $160,800 in the fourth quarter, which is 1.7 percent below the fourth quarter of 2010. Ten metros showed increases in their median condo price from a year ago; one was unchanged and 43 areas had declines.
Regionally, existing-home sales in the Northeast rose 6.3 percent in the fourth quarter and are 3.7 percent above the fourth quarter of 2010. The median existing single-family home price in the Northeast fell 4.6 percent to $229,200 in the fourth quarter from a year ago.
In the Midwest, existing-home sales increased 7.0 percent in the fourth quarter and are 14.1 percent higher than a year ago. The median existing single-family home price in the Midwest declined 3.3 percent to $134,100 in the fourth quarter from the fourth quarter in 2010.
Existing-home sales in the South rose 3.8 percent in the fourth quarter and are 9.1 percent above the same quarter in 2010. The median existing single-family home price in the South was $146,500 in the fourth quarter, down 3.8 percent from a year earlier.
Existing-home sales in the West increased 8.1 percent in the fourth quarter and are 8.4 percent higher than a year ago. The median existing single-family home price in the West declined 4.2 percent to $205,200 in the fourth quarter from the fourth quarter of 2010.
Source: National Association of REALTORS®; Daily Real Estate News (February 9, 2012) | Blog distribution provided by Kenneth Bargers and Bargers Solutions, a proud member of Pilkerton Realtors, residential real estate services located in Nashville, Tennessee