(November 15, 2005) -- Strong annual increases in median existing-home prices were common in most metropolitan areas during the third quarter, according to the latest report by the NATIONAL ASSOCIATION OF REALTORS®.
The association’s third-quarter median existing single-family home price survey, covering changes in 147 metropolitan statistical areas, shows 69 areas with double-digit annual price increases. Six metros had small price declines.
The national median existing single-family home price was $215,900 in the third quarter, up 14.7 percent from the third quarter of 2004 when the median price was $188,200. The median is a typical market price where half of the homes sold for more and half sold for less. Ninety-seven metros—two-thirds of the total—experienced increases greater than the U.S. historic average of 6.4 percent.
David Lereah, NAR’s chief economist, says the pace of price appreciation in the third quarter is far from being normal over time. “These historically high home price gains are the simple result of more buyers than sellers in the market,” he says. “The good news is that inventory levels are improving, and housing supply will come close to buyer demand in 2006. In other words, we expect a healthy and more balanced market next year.”
Since 1968, home prices generally have risen between 1 and 2 percentage points faster than the overall rate of inflation; the historic average price gain appears high relative to inflation because there was a period of rapid inflation in the U.S. during the 1970s and early 1980s.
NAR President Thomas M. Stevens explains what buyers and sellers generally can expect in the coming year. “Improvements in inventory in most areas should take pressure off of home buyers to make snap decisions, or find themselves in a competitive bidding situation,” says Stevens, senior vice president of NRT Inc. in Vienna, Va. “This calmer real estate market will create a more level environment for buyers in weighing options to invest in the American dream of homeownership. Sellers will enjoy very healthy gains on the value of their home, but should expect annual increases to be much closer to historic levels going forward.”
The strongest price increase in the nation was in the Phoenix-Mesa-Scottsdale area of Arizona, where the third quarter price of $268,000 rose 55.2 percent from a year earlier. Next was Orlando, Fla., at $261,300, up 44.8 percent from the third quarter of 2004. Cape Coral-Fort Meyers, Fla., with a third quarter median price of $277,600, was up 42.5 percent in the last year.
The areas experiencing price declines were lower-priced markets, with one or both of the conditions necessary for price softness—local economic weakness, primarily in jobs, or a large supply of homes for sale in the local area.
Median third-quarter metro area prices ranged from $72,800 in Danville, Ill., to nearly 10 times that amount in the San Francisco-Oakland-Fremont area of California where the median price was $721,900. The second most expensive area in the United States was Anaheim-Santa Ana (Orange County, Calif.) at $710,700, followed by the Honolulu area and San Diego-Carlsbad-San Marcos area of California, tied at $615,000.
Other low-cost markets include, Elmira, N.Y., the second least-costly metro, at $77,100, and Decatur, Ill., with a third-quarter typical resale home price of $85,500.
Regionally, the strongest increase was in the West, where the median existing single-family home price rose 18.8 percent over the last year to $322,000 during the third quarter. After Phoenix-Mesa-Scottsdale, the strongest increase in the West was in the Tucson area, where the median price of $242,300 rose 34.7 percent from a year earlier, followed by Honolulu, up 31.1 percent, and Eugene-Springfield, Ore., at $208,900, up 25.9 percent from the third quarter of 2004.
In the Northeast, the median resale home price during the third quarter was $249,300, up 13.2 percent from a year earlier. The strongest increase in the region was in the Glenn Falls, N.Y., area, at $160,000, up 25.4 percent from the third quarter of 2004, followed by Kingston, N.Y., with a median price of $259,300, up 19.8 percent, and the Philadelphia-Camden-Wilmington area of Pennsylvania, New Jersey, Delaware, and Maryland, at $230,600, up 19.0 percent.
In the Midwest, the third-quarter median existing-home price of $173,300 rose 13.1 percent from the same period in 2004. The strongest increase in the Midwest was in the Waterloo-Cedar Falls area of Iowa, where the median price of $111,000 was 14.8 percent higher than the third quarter of 2004. Next was Bloomington-Normal, Ill., at $170,900, up 14.5 percent, and Rockford, Ill., at $120,400, up 13.7 percent in the last year.
In the South, the typical existing-home price was $183,500 in the third quarter, up 7.7 percent from a year earlier. After the Orlando and Cape Coral-Fort Meyers areas of Florida, the strongest increase in the South was in the Deltona-Daytona Beach-Ormond Beach, Fla., area, at $208,200, up 33.8 percent from the third quarter of 2004. Next was Palm Bay-Melbourne-Titusville, Fla., where the third quarter median price of $212,800 was 33.6 percent higher than a year ago, and Ocala, Fla., at $151,500, up 31.9 percent.
—NAR
