U.S. home prices had, for the first half of 2014, raced upwards in what was mostly a negative sign for the broader housing market, but even as price appreciation moderated soon thereafter, this figure remained decent in the December ending quarter of 2014, according to recently released data from the National Association of Realtors.
The NAR’s report credits tight housing inventory as the main driver of home price growth, though it also named low mortgage interest rates and improving employment prospects as other variables that led to good price growth in quarter four 2014. The national median price on existing single family homes appreciated 6 percent year-over-year to $208,700 in the fourth calendar quarter of 2014, while this figure had increased in 86 percent, or 150 out of 175 of metropolitan markets covered by the NAR’s data. This is actually an improvement over quarter three’s figures, where 73 percent of metros experienced price growth. Furthermore, the quarter four data also showed 24 metros, or 14 percent of all metropolitan markets, posting double-digit price gains.
“Home prices in metro areas throughout the country continue to show solid price growth, up 25 percent over the past three years on average,” said NAR chief economist Lawrence Yun in a statement. However, Yun also acknowledged that these “solid” price increases, while good for existing homeowners who need to rebuild or build equity, continued to affect lower-income consumers. “Low interest rates helped preserve affordability last quarter, but it’ll take stronger income gains and more housing supply to help meet the pent-up demand for buying,” he added.
In the light of this, it was not surprising that total existing home sales, which covers single family homes and condominiums, dropped 1 percent in the December 2014 quarter to a seasonally adjusted, annualized rate of 5.07 million.
However, existing home sales remained 2.6 percent on a year-over-year basis. There were a total of 1.85 million existing homes for sale as of the end of quarter four 2014, which is a tighter inventory than the 2.01 million homes available in quarter four 2013. Average supply of homes in the December 2014 frame was 4.9 months; this is below the six to seven month range most housing experts believe redounds to a balanced market between buyers and sellers.
Price gains were an especially nagging problem in Western markets, as the current supply of new and existing homes could not keep up with consumer demand and population growth. “Unless home builders significantly boost construction, housing supply shortages could develop and lead to further price acceleration this spring,” Yun said, warning against a potentially deadly headwind ahead of the traditionally busy spring home buying season.
For the fourth, or December ending quarter of 2014, San Jose, Calif. was the most expensive metropolitan market, with the median existing single family home price at $855,000. San Francisco ($742,900), Honolulu ($701,300), Anaheim-Santa Ana ($688,500), and San Diego ($493,100) rounded out the top five, making it four Californian metros in this list.
As a result, existing home sales in the Western region were down 6 percent in quarter four 2014, and are now 0.9 percent lower on a year-over-year basis. The median existing single family home price in the region was up 4.8 percent year-over-year to $299,500.