In the first quarter of 2016, high demand for housing and tight inventory created the perfect market conditions for continued home price gains across the nation’s major metros.
Within 87 percent of measured markets — or 154 out of 178 metropolitan statistical areas (MSAs) — the median existing single-family home price grew year-over-year. That means only 13 percent of the recorded MSAs experienced decreased median prices compared to a year prior. More markets saw rising prices this quarter than the final quarter of 2015, when 81 percent of metro areas measured price gains.
In addition, 16 percent of metro areas (28 total) reported double-digit increases, down from 30 metro areas in the fourth quarter and 51 recorded in last year’s first quarter.
Priced out
The number of existing homes available decreased year-over-year from 2.01 million in Q1 2015 to 1.98 million homes for sale at the end of this year’s first quarter.
Modest growth in median family income to $68,431 wasn’t enough to improve affordability, which in the first quarter experienced a year-over-year decline due to rising prices and higher mortgage rates.
“To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $47,819, a 10 percent down payment would require an income of $45,302, and $40,268 would be needed for a 20 percent down payment,” NAR wrote in the Q1 announcement.
At a time when affordable housing remains an obstacle for many buyers, NAR’s chief economist Lawrence Yun offered an analysis of the market’s steady price growth and competing forces.
“The solid run of sustained job creation and attractive mortgage rates below 4 percent spurred steady demand for home purchases in many local markets,” said Yun in a press release. “Unfortunately, sales were somewhat subdued by supply and demand imbalances and broadly rising prices above wage growth. As a result, the path to homeownership so far this year remains strenuous for a segment of prospective buyers in the most competitive areas.”
In the first quarter, four out of the five priciest markets were in California:
- San Jose, California (median existing single-family price: $970,000)
- San Francisco ($770,300)
- Honolulu ($721,400)
- Anaheim-Santa Ana, California ($713,700)
- San Diego ($554,300)
The five most affordable metros included:
- Cumberland, Maryland (median existing single-family price: $67,400)
- Youngstown-Warren-Boardman, Ohio ($77,500)
- Decatur, Illinois ($83,300)
- Wichita Falls, Texas ($95,200)
- Rockford, Illinois ($95,800)
Broker-owner of Real Estate II Inc. in Coral Springs, Florida, and NAR President Tom Salomone, commented on increasing buyer interest during the spring season in a press release: “Especially in the top job producing metro areas, Realtors are reporting a steady stream of interested buyers either in the early stages of the home search or currently ready to make a purchase,” he said. “Buyers will need to remain in close communication with a Realtor this spring and be prepared to act fast when a home in their price range comes along.
“Without much newly constructed housing stock coming onto the market, existing-homes competitively priced in many areas are going under contract very quickly.”
Regional outlook
The South and West saw the most quarterly upward movement in number of sales. Existing-home sales in the South rose 5.2 percent from Q4 2015 and 3.6 percent year-over-year. The median existing home sale price also increased to $192,100 (5.8 growth year-over-year).
The West also experienced growth in existing-home sales by 0.9 percent in the first quarter, or 2.1 percent year-over-year, and the median home price increased by 7.1 percent from a year earlier to $315,900.
In comparison, existing-home sales declined in the Northeast by 4.1 percent in Q1 but increased by 11.2 percent year-over-year. Home prices in this region were up 1.8 percent to $249,400.
Prices in the Midwest also increased 7.3 percent year-over-year to $167,900. Existing-home sales were unchanged since the previous quarter but up 6.1 percent year-over-year.
Yun added: “In spite of deficient supply levels, stock market volatility and the paltry economic growth seen so far this year, the housing market did show resilience and had its best first quarter of existing-sales since 2007 (5.66 million).
“The demand for buying is there, but unless the stock of new and existing-homes for sale increases significantly — especially in several markets in the West — the housing market will struggle to reach its full potential.”