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Median home price hits 8-year high

Tight inventory drives home prices

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Coming in at the strongest gain in seven and a half years, the national year-over-year median home prices continued to increase in the majority of metropolitan areas in the second quarter, according to the latest quarterly report by the National Association of Realtors.

Buyers remain well positioned to afford a home in their area, despite rising prices and higher mortgage interest rates, the report revealed.

The median existing single-family home priced rose in 87% of measured markets, as 142 out of 163 metropolitan statistical areas posted gains based on closings in the second quarter versus the second quarter of 2012.

Of the 163 MSAs, 31% — 50 areas — had double-digit gains, one remained unchanged and 20 saw prices drop.

In the latest quarter, eight markets were added to the report. In the second quarter of 2012, 75% of all available areas reported price gains year-over-year, and only 14% of markets increased by double-digit amounts.

Tight inventory is continuing to drive home prices, said Lawrence Yun, NAR chief economist. 

“There continue to be more buyers than sellers, and that is placing pressure on home prices, with multiple bids common in some areas of the country,” he said.  “Higher interest rates are now causing sales to level out, but the tight supply conditions look to be with us for the balance of the year in most of the country.  Areas with tighter supplies generally are seeing the strongest price growth, including markets such as Sacramento, Atlanta, Las Vegas, Naples, San Francisco and Los Angeles.”

Nationwide, the median existing single-family home price was $203,500 in the second quarter, a 12.2% increase from $181,300 in the second quarter 2012. This marks the strongest year-over-year increase since back in the fourth quarter of 2005, when it skyrocketed 13.6%. The median price rose 11.3% year-over-year in the first quarter.

According to NAR, a shrinking market share of lower priced homes accounts for some of the price growth. Accounting for 17% of second-quarter sales, distressed homes dropped from 26% of total sales a year ago.

Yun added that areas impacted by judicial foreclosure are seeing more modest price increases.  “In areas where foreclosed inventory still looms because distressed properties are mired in a slow process, lender and market uncertainty are holding back price growth.  This includes areas such as New York City; Hartford; Conn.; and some markets in New Jersey.”

There were 2.19 million existing homes available for sale at the end of the second quarter, a 7.6% decline year-over-year. In the second quarter of 2012, there were 2.37 million homes on the market. During this year’s second quarter, there was a 5.1-month supply, compared with 6.4 months in the second quarter of 2012.

“Supplies in the low 5-month range can be expected for the foreseeable future,” Yun said.  “Steady increases in new home construction will help to relieve shortage conditions going into 2014, which would moderate price growth.”

Total existing-home sales — including single-family and condo — increased 2.4% to a seasonally adjusted annual rate of 5.06 million in the second quarter from 4.94 million in the first quarter. The second-quarter rates were 12.3% higher than the 4.51 level during the second quarter of 2012.

Total existing-home sales were at the highest pace since the second quarter of 2007, when they hit 5.23 million.

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