Persistent supply shortages throughout the United States led to slightly faster home price appreciation during the third quarter of 2016, according to the latest data from estate agents.
The quarterly report from the National Association of Realtors also shows that seven of the 10 most expensive housing markets in are in the West, including San Jose in California which had a median single family home price of $1 million for the second quarter in a row.
Overall the median existing single family home price increased in 875 of measured markets, with 155 out of 178 metropolitan statistical areas showing gains based on closed sales in the third quarter compared with the third quarter of 2015 while 22 recorded lower median prices from a year earlier.
There were a growing number of rising markets in the third quarter compared to the second quarter of this year, when price gains were recorded in 83% of metro areas and 14% saw double digit increases, unchanged from the second quarter of this year but up from the 12% recorded a year ago.
Lawrence Yun, NAR chief economist, explained that prospective buyers faced a very challenging market during the third quarter. ‘Mortgage rates around historical lows and solid local job creation created a winning formula for sustained home buying demand all summer long,’ he said.
‘Unfortunately for house hunters in several of the top job producing metro areas around the country, deficient supply levels limited their options and drove prices higher, especially in markets in the West and South,’ he added.
The national median existing single-family home price in the third quarter was $240,900, up 5.2% from the third quarter of 2015 when it was $228,900 and surpasses this year’s second quarter median of $240,700 as the current peak quarterly median sales price. The median price during the second quarter increased 4.9% from the second quarter of 2015.
Total existing home sales, including single family and condos fell by 2.2% to a seasonally adjusted annual rate of 5.38 million in the third quarter from 5.5 million in the second quarter of this year and are 0.4% lower than the 5.4 million pace during the third quarter of 2015.
‘After climbing to their highest annual pace in over nine years in June, sales sputtered in the third quarter because inventory could not catch up with what was being quickly sold. Only a decent rebound in September kept the monthly and annual sales declines from being even larger,’ Yun pointed out.
At the end of the third quarter, there were 2.04 million existing homes available for sale, some 6.8% below the 2.19 million homes for sale at the end of the third quarter in 2015. The average supply during the third quarter was 4.6 months, down from 4.9 months a year ago.
Yun warned that if mortgage rates start to rise heading into next year, prospective buyers could face weakening affordability conditions in their market unless supply dramatically improves.
‘That’s why it’s absolutely imperative that home builders ramp up the production of more single-family homes to meet demand and slow price growth,’ he said.
The five most expensive housing markets in the third quarter were the San Jose metro area where the median existing single family price was $1 million, followed by San Francisco at $835,400, Honolulu at $745,300, Anaheim-Santa Ana in California at $740,100 and San Diego at $589,300.
The five lowest cost metro areas in the third quarter were Youngstown-Warren-Boardman in Ohio at $90,300, Cumberland in Maryland at $94,400, Decatur in Illinois at $99,400, Elmira in New York at $109,400 and Rockford in Illinois at $111,900.
The data also shows that total existing home sales in the Northeast dropped 7.5% in the third quarter and are now 1.9% below the third quarter of 2015. The median existing single family home price in the Northeast was $272,600 in the third quarter, up 1.2% from a year ago.
In the Midwest, existing home sales decreased 4.2% in the third quarter but are 1% above a year ago. The median existing single family home price in the Midwest increased 5.6% to $191,200 in the third quarter from the same quarter a year ago.
Existing home sales in the South fell 2.7% in the third quarter and are 0.9% lower than the third quarter of 2015. The median existing single family home price in the South was $213,700 in the third quarter, 6.5% above a year earlier.
In the West, existing home sales increased 4.6% in the third quarter and are unchanged from a year ago. The median existing single family home price in the West increased 7.6% to $349,200 in the third quarter from the third quarter of 2015.