The national median existing single family home price was $181,500 in the second quarter of 2012, up 7.3% from $169,100 in the second quarter of 2011, according to the latest figures from the National Association of Realtors.
This is the strongest year on year increase since the first quarter of 2006 when the median price rose 9.4%. But even with the gain the current price is 20.1% below the record set in 2006.
The median price is where half sold for more and half sold for less. Medians are more typical than average prices, which are skewed higher by a relatively small share of upper end transactions. Median existing single family home prices are rising in more metropolitan areas, but a lack of inventory, notably in lower price ranges, is limiting buyer choices in an increasing number of markets around the country, the report also shows.
The median existing single family home price rose in 110 out of 147 metropolitan statistical areas (MSAs) based on closings in the second quarter in comparison with same quarter in 2011. Overall three areas were unchanged and 34 had price declines. In the first quarter of 2012 there were 74 areas showing price gains from a year earlier, while in the second quarter of 2011 only 41 metros were up.
A separate breakout of income requirements to buy a home on a metro basis shows a wide range of conditions, but most buyers had ample income in the second quarter assuming they could meet mortgage credit standards. NAR chief economist Lawrence Yun said that home prices are set to rise in even more markets during upcoming quarters. ‘It’s most encouraging to see a growing number of metro areas with rising median prices, which is improving the equity position of existing home owners,’ he explained. ‘Inventory has been trending down and home builders are still under producing in relation to growing demand. Some of the improvement in prices is due to a smaller share of sales in low price ranges where inventory is tight,’ he added.
Distressed homes, that is foreclosures and short sales which sold at deep discounts, accounted for 26% of second quarter sales, down from 33% a year ago. Total existing home sales, including single family and condos, slipped 0.7% to a seasonally adjusted annual rate of 4.54 million in the second quarter from 4.57 million in the first quarter, but were 8.6% above the 4.18 million pace during the second quarter of 2011. At the end of the second quarter there were 2.39 million existing homes available for sale, which is 24.4% below the close of the second quarter of 2011 when there were 3.16 million homes on the market.
There has been a steady downtrend since inventories set a record of 4.04 million in the summer of 2007. NAR president Moe Veissi said that buying power is historically high. ‘Home buyers today can stay well within their means. Record low mortgage interest rates and an over correction in home prices have opened the door to many potential buyers,’ he explained.
‘What we need now is additional inventory in the lower price ranges, so we hope banks will be releasing more foreclosure inventory into the market. With gains apparent in all of the price measures, banks also should have more confidence in expanding mortgage credit to home buyers using safe but sensible standards,’ Veissi added.
A breakout of incomes needed to purchase a median priced existing single family home by metro area shows the typical buyer has ample income. Required income amounts are determined using several down payment percentages, assuming a mortgage interest rate of 4% and 25% of gross income devoted to mortgage principal and interest.
The national median family income was $61,000 in the second quarter. However, to purchase a home at the national median price, a buyer making a 5% down payment would only need an income of $39,900. With a 10% % down payment the required income is $37,800, while with 20% down the necessary income is $33,600. Because the income required to buy to a typical home is very manageable by historical standards, any further decline in mortgage interest rates will have little effect. ‘Changes in underwriting guidelines would have a far greater impact,’ Yun said.
In the condo sector, metro area condominium and cooperative prices, covering changes in 53 metro areas, showed the national median existing condo price was $178,000 in the second quarter, up 7.5% from the second quarter of 2011. Some 29 metros showed increases in their median condo price from a year ago and 24 areas had declines.
First time buyers purchased 34% of all homes in the second quarter, compared with 33% in the first quarter and 35% in the second quarter of 2011. Historically they are close to 40% of the market. The share of all cash home purchases was 29% in the second quarter, down from 32% in the first quarter and it was 30% in the second quarter of 2011. Investors, who make up the bulk of cash purchasers and compete with first time buyers, accounted for 19% of all transactions in the second quarter, down from 22% in the first quarter and 19% a year ago.
Regionally, existing home sales in the north east slipped 0.6% in the second quarter but are 10.6% above the second quarter of 2011. The median existing single family home price in the north east declined 1.6% to $241,300 in the second quarter from a year ago. In the midwest existing home sales rose 1.3% in the second quarter and are 16.2% higher than a year ago.
The median existing single family home price in the midwest rose 7.5% to $149,400 in the second quarter from the same quarter in 2011. Existing home sales in the south increased 1.3% in the second quarter and are 7.7% above the second quarter of 2011.
The regional median existing single family home price increased 7.4% to $163,200 in the second quarter from a year earlier. With tight inventory, existing-home sales in the west fell 5.3% in the second quarter but are 3% higher than a year ago. The median existing single family home price in the west jumped 13.4% to $234,000 in the second quarter from the second quarter of 2011. ‘Inventory is pretty tight in all prices ranges in most of the west except for the upper end, which accounts for the sharp price gain,’ Yun noted.
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