Headstrong is a rather interesting word, but the National Association of Realtors® (NAR) chose it to describe the continuing imbalance between supply and demand in the housing market. NAR blames this imbalance for slightly tempering home sales as well as pushing continued robust price growth in the second quarter of 2017.
NAR says the national median existing single-family home price in the second quarter rose 6.2 percent from the same quarter in 2016, an increase from $240,700 to $255,600. This is a slight moderation from the 6.9 percent year-over-year price growth logged in the first quarter of this year, but the most recent median price still set a new peak, surpassing Q3 2016’s median of $241,300. NAR says single-family home prices increased compared to the same quarter of 2016 in 154 or 87 percent of the 178 metropolitan statistical areas it tracks.
Lawrence Yun, NAR chief economist, says home prices in most metro areas continued their fast ascent in the second quarter because supply remained at “pitiful” levels. “The 2.2 million net new jobs created over the past year generated significant interest in purchasing a home in what was an extremely competitive spring buying season,” he said. “Listings typically flew off the market in under a month – and even quicker in the affordable price range – in several parts of the country. With new supply not even coming close to keeping pace, price appreciation remained swift in most markets.”
Added Yun, “The glaring need for more new home construction is creating an affordability crisis that needs to be addressed by policy officials and local governments. An increasing share of would-be buyers are being priced out of the market and are unable to experience the wealth building benefits of homeownership.”
Twenty-three or 13 percent of the metro areas had double digit price increases, another slight moderation from the first quarter when there were 30 areas with such gains. However, the 87 percent of markets with increases in the second quarter was 2 percentage points more than rising markets in the first quarter.
Existing home sales during the quarter were down slightly from Q1, moving from a seasonally adjusted annual rate of 5.62 million to 5.57 million, an 0.9 percent decline. Second quarter sales were still 1.6 percent higher than in the same quarter of 2016.
Yun’s “pitiful” supply of existing homes numbered 1.96 million at the end of the second quarter, 7.1 percent fewer than were for sale a year earlier. The average supply during the second quarter was 4.2 months – down from 4.6 months a year earlier.
Family income rose during the quarter to a national median of $71,529, but NAR said this was not enough to offset weaker affordability arising out of higher mortgage rates and home prices. To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $56,169, a 10 percent down payment would require an income of $53,213, and $47,300 would be needed for a 20 percent down payment.
“Mortgage rates have subsided in recent months, which has only somewhat helped take away some of the sting prospective buyers are experiencing with the deteriorating affordability conditions in many areas,” added Yun. “Household incomes may be rising and giving consumers assurance that now is a good time to buy, but these severe inventory shortages will likely continue to be a drag on sales potential the second half of the year.”
Four of the five most expensive housing markets in the second quarter were in California. San Jose, was number one with a median price of $1,183,400, followed by San Francisco at $950,000, and Anaheim-Santa Ana, at $788,000. San Diego at $605,000 was just behind urban Honolulu’s median of $760,600.
The five lowest-cost metro areas in the second quarter were Youngstown, Ohio $87,000; Cumberland,Maryland, $98,200; Decatur, Illinois, $107,400; and Binghamton and Elmira, New York, at $109,000 and $111,600 respectively.
Condos and cooperative saw slightly less appreciation than single-family homes. The national median existing-condo price was $239,500 in the second quarter, up 5.4 percent from a year earlier ($227,200). Eighty-seven percent of the 61 metro areas tracked showed gains in their median condo price from a year ago.
Total existing-home sales in the Northeast rose 1.3 percent in the second quarter and are 0.4 percent higher year-over-year. The median existing single-family home price in the Northeast was $282,300, a 3.2 percent annual increase.
Sales in the Midwest increased 4.2 percent quarter-over-quarter, but are 0.5 percent lower than a year ago. The median existing single-family home price increased 6.6 percent to $204,000 on an annual basis.
The South saw sales dip 3.0 percent in the second quarter but they remain 2.5 percent higher on an annual basis. The median existing single-family home price was $229,400, up 6.7 percent.
There was a 3.7 percent decline in quarter-over-quarter sales in the West, but the pace was up 3.1 percent from the same quarter in 2016. Median single-family prices rose 7.5 percent to $372,400.