CHICAGO – Nov. 2, 2017 – Severely lacking inventory levels across the country pinched sales growth and kept home prices rising at a steady clip in nearly all metro areas in the third quarter, according to the latest quarterly report by the National Association of Realtors® (NAR).
The national median existing single-family home price in the third quarter was $254,000, which is up 5.3 percent from the third quarter of 2016 ($241,300). The median price during the second quarter increased 6.1 percent from the second quarter of 2016.
Single-family home prices last quarter increased in 92 percent of measured markets, with 162 out of 177 metropolitan statistical areas (MSAs) showing sales price gains compared with the third quarter of 2016. Fifteen areas (8 percent) recorded lower median prices from a year earlier.
Lawrence Yun, NAR chief economist, says the housing market's performance during the third quarter was underwhelming.
"The stock market's climb to new record highs, the continued stretch of outstanding job growth and mortgage rates under 4 percent kept homebuyer demand at a very robust level throughout the summer," says Yun. "Unfortunately, the pace of new listings was unable to replace what was quickly sold. Home shoppers had little to choose from, and many had outbid others in order to close on a home. The end result was a slowdown in sales from earlier in the year, steadfast price growth and weakening affordability conditions."
Yun says that price appreciation moderated a bit in the third quarter, but "home prices still far exceed incomes in several parts of the country – especially in the largest markets in the South and West where new home construction simply is not keeping up with job growth."
Nineteen metro areas in the third quarter (11 percent) experienced double-digit increases, down from 23 areas in the second quarter (13 percent). Overall, there were more rising markets in the third quarter compared to the second quarter, when price gains were recorded in 87 percent of metro areas.
Total existing-home sales, including single family and condos, slipped 3.1 percent to a seasonally adjusted annual rate of 5.39 million in the third quarter from 5.56 million in the second quarter, but they're still 0.2 percent higher than the 5.38 million pace during the third quarter of 2016.
At the end of the third quarter, there were 1.90 million existing homes available for sale, which was 6.4 percent below the 2.03 million homes for sale at the end of the third quarter in 2016. The average supply during the second quarter was 4.2 months – down from 4.6 months in the third quarter of last year.
Last quarter, the uptick in the national family median income ($71,775) did little to stave off continued weakness in affordability from the combination of higher mortgage rates and home prices compared to a year ago. To purchase a single-family home at the national median price, a buyer making a 5 percent downpayment would need an income of $55,142, a 10 percent down payment would require an income of $52,240, and $46,435 would be needed for a 20 percent downpayment.
"Affordability pressures are frustratingly occurring in places where jobs are plentiful and incomes are rising," says Yun. "Without a significant boost in new and existing inventory to alleviate price growth, job creation could slow in high cost areas in upcoming years if residents begin exiling to more affordable parts of the country."
The five most expensive housing markets in the third quarter were the San Jose, California metro area, where the median existing single-family price was $1,165,000; San Francisco, $900,000; Anaheim-Santa Ana, California, $790,000; urban Honolulu, $760,200; and San Diego, $607,000.
The five lowest-cost metro areas in the third quarter were Decatur, Illinois, $86,300; Youngstown-Warren-Boardman, Ohio, $88,900; Cumberland, Maryland, $96,400; Wichita Falls, Texas, $113,800; and Elmira, New York, $117,300.
Metro area condominium and cooperative prices – covering changes in 61 metro areas – showed the national median existing-condo price was $237,200 in the third quarter, up 5.4 percent from the third quarter of 2016 ($225,100). Ninety-three percent of metro areas showed gains in their median condo price from a year ago.
Regional breakdown
Total existing-home sales in the Northeast dropped 7.9 percent in the third quarter and are 0.5 percent below the third quarter of 2016. The median existing single-family home price in the Northeast was $283,800 in the third quarter, up 4.1 percent from a year ago.
In the Midwest, existing-home sales declined 3.3 percent in the third quarter and are 0.8 percent below a year ago. The median existing single-family home price in the Midwest increased 5.6 percent to $202,400 in the third quarter from the same quarter a year ago.
Existing-home sales in the South fell 4.4 percent in the third quarter but are 0.2 percent higher than the third quarter of 2016. The median existing single-family home price in the South was $226,100 in the third quarter, 5.5 percent above a year earlier.
In the West, existing-home sales increased 2.8 percent in the third quarter and are 1.9 percent above a year ago. The median existing single-family home price in the West increased 7.0 percent to $373,700 in the third quarter from the third quarter of 2016.