Metro Areas See Solid Home-Price Growth, Some Markets Facing Affordability Issues

The lion’s share of metropolitan areas continued to experience strong year-over-year price growth in the fourth quarter, according to the latest quarterly report by the National Association of Realtors®.

The median existing single-family home price increased in 73 percent of measured markets, showing gains compared to same time last year.

NAR’s chief economist, Lawrence Yun, said there are two ways of looking at the price gains. “The vast majority of homeowners have seen significant gains in equity over the past two years, which is helping the economy through increased consumer spending,” he said. “At the same time, home prices have been rising faster than incomes, while mortgage interest rates are above the record lows of a year ago. This is beginning to hamper housing affordability.”

The national median existing single-family home price was $196,900 in the fourth quarter, up 10 percent in the fourth quarter of 2012.

Yun added, “New home construction activity needs to increase significantly in the fast appreciating markets to help relieve upward price pressure.”

“Added housing supply will help moderate price growth this year, and should help to stem erosion in affordability, but mortgage interest rates are projected to rise above 5 percent by the end of the year,” Yun said.

According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged 4.30 percent in the fourth quarter, down from 4.44 percent in the third quarter; it was a record low 3.36 percent in the fourth quarter of 2012, with records dating back to 1971.

NAR’s President however said consumers need to keep in mind that all real estate is local. “The national figures provide useful background, but it really gets down to supply and demand in a given neighborhood,” he said. “Metropolitan area figures are an excellent gauge of local housing markets, but there can be widely ranging conditions within a metro area. This is why it’s best to consult with a Realtor®, who has additional resources and can provide much greater detail on specific locations.”

Total existing-home sales in the Northeast declined some, but are 7 percent above 2012 levels. The median existing single-family home price in the Northeast was $241,000, up 5.5 percent from a year ago.

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