A moderating pace of sales had little impact on the trajectory of home prices during the final three months of the year, which picked up speed and showed continued growth in most of the U.S., according to the latest quarterly report by the National Association of Realtors.
The median existing single-family home price increased in 81 percent of measured markets, with 145 out of 179 metropolitan statistical areas (MSAs) showing gains based on closings in the fourth quarter compared with the fourth quarter of 2014.
There were slightly fewer rising markets in the fourth quarter compared with the third quarter, when price gains were recorded in 87 percent of metro areas. Thirty metro areas in the fourth quarter (17 percent) experienced double-digit increases, a jump from the 20 metro areas in the third quarter. Twenty-two metro areas (12 percent) experienced double-digit increases in the fourth quarter of 2014.
For all of 2015, an average of 89 percent of measured metro areas saw increasing home prices, up from the averages in 2014 (83 percent) and 2013 (88 percent).
NAR Chief Economist Lawrence Yun says faster price growth reawakened in the final months of 2015 despite the pace of sales slowing from earlier in the year.
“Even with slightly cooling demand, the unshakeable trend of inadequate supply in relation to the overall pool of prospective buyers inflicted upward pressure on home prices in several metro areas,” he said in a news release. “As a result, homeownership continues to be out of reach for a number of qualified buyers in the top job producing, but costliest, parts of the country – especially on the West Coast and parts of the South.”
The national median existing single-family home price in the fourth quarter was $222,700, up 6.9 percent from the fourth quarter of 2014 ($208,400).
Total existing-home sales, including single family and condo, declined 5.4 percent to a seasonally adjusted annual rate of 5.18 million in the fourth quarter from 5.48 million in the third quarter, but are 2.4 percent higher than the 5.06 million pace a year earlier.
“Without a significant ramp-up in new-home construction and more homeowners listing their homes for sale, buyers are likely to see little relief in the form of slowing price growth in the months ahead,” Yun said.
Rising home prices, despite lower mortgage rates and an increase in the national family median income ($68,034), caused affordability to fall in the fourth quarter compared with the fourth quarter of 2014. To purchase a single-family home at the national median price, a buyer making a 5 percent downpayment would need an income of $49,535, a 10 percent downpayment would require an income of $46,928, and $41,714 would be needed for a 20 percent downpayment.
The five most expensive housing markets in the fourth quarter were the San Jose, Calif., metro area, where the median existing single-family price was $940,000; San Francisco, $781,600; Honolulu, $716,600; Anaheim-Santa Ana, Calif., $708,700; and San Diego, $546,800.
The five lowest-cost metro areas in the fourth quarter were Youngstown-Warren-Boardman, Ohio, $81,200; Cumberland, Md., $86,100; Rockford, Ill., $87,600; Decatur, Ill., $90,000; and Wichita Falls, Texas, $101,900.
NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Fla., says the main challenge for buyers so far in 2016 continues to be insufficient supply.
“With the exception of some metro areas with jobs heavily reliant in the energy sector, Realtors say demand has held steady during the winter months,” he said. “Serious buyers should be prepared to act fast, and remain in close communication with a Realtor to deploy a negotiation strategy that fits their budget. Even in these typically slower winter months, listings in affordable price ranges are going under contract quickly.”