US property prices pushed to record high by lack of supply

Residential property prices in the United States reached a new record high in the second quarter of 2018, up 5.3% to $255,400, the latest index figures show.

Staggeringly low inventory levels in much of the country are responsible for the robust level of price growth, according to the index report from the National Association of Realtors (NAR).

The San Francisco metro area joined the San Jose metro area for having a median sales price above $1 million and single family home prices increased in 90% of markets, with 161 out of 178 metropolitan statistical areas showing sales price gains in the second quarter compared to a year ago.

‘The ongoing supply crunch affecting much of the country worsened for most of the second quarter, as the growing number of interested buyers in many markets overwhelmed what was already a meagre level of available listings. With not enough homes for sale, multiple bids caused prices to rise briskly and further out of the reach of some prospective buyers,’ said Lawrence Yun, NAR chief economist.

The index also shows that sales fell by 1.7% to a seasonally adjusted annual rate of 5.41 million in the second quarter from 5.51 million in the first quarter, and are 2.4% lower than the 5.55 million pace during the second quarter of 2017.

‘Solid economic growth, a healthy labour market and the large millennial population should be driving home sales much higher. As long as economic conditions maintain current levels, there’s still a chance for sales to break out this year. However, with mortgage rates trending higher, it will only happen if supply levels improve enough to cool the speedy price growth in a majority of the country,’ Yun pointed out.

He explained that unaffordable conditions in many of the largest metro areas, especially in the West, continues to be a growing concern for many middle class households aspiring to buy a home.

‘Home builders, facing higher costs and labour shortages, are simply not producing enough affordable homes to satisfy demand. Local governments need to acknowledge this glaring issue and ease some of the zoning laws, permitting processes and regulations that are slowing construction,’ he added.

The five most expensive housing markets in the second quarter were San Jose where the median price was $1,405,000, San Francisco-Oakland-Hayward at $1,070,000, Anaheim-Santa Ana-Irvine at $830,000, urban Honolulu at $795,200 and San Diego-Carlsbad at $645,000.

The five lowest cost metro areas in the second quarter were Youngstown-Warren-Boardman in Ohio at $94,400, Cumberland in Maryland at $94,900, Decatur in Illinois at $96,900, Elmira in New York at $106,300 and Erie in Pennsylvania at $121,700.

A breakdown of the figures shows that sales in the Northeast were unchanged from the first quarter of 2018 and down 8.9% from a year ago with a median price of $288,900, up 2.3% year on year. In the Midwest sales increased by 1.6% in the second quarter but are 2.8% below a year ago with a median price of $210,600, up 3.5% on an annual basis.

Sales in the South declined 2.7% in the second quarter but up 0.6% year on year with a median price of $238,500, some 4% higher than a year earlier. While in the West sales fell 4.1% and 3.6% down on a year ago. The median price was up 8.3% from the second quarter of 2017 at $403,300.