WASHINGTON – May 12, 2015 – The number of metro areas with double-digit price appreciation doubled in the first quarter of this year compared to the quarter before, according to the National Association of Realtors®' latest quarterly housing report.
Strong demand and a tight inventory of for-sale homes for-sale pushed up nationwide home prices. The first-quarter median existing single-family home price rose in 148 out of 174 metro areas tracked by NAR. Only 25 areas recorded lower median prices compared to a year earlier, while 51 metros saw double-digit increases – a sharp increase from the 24 metro areas in the fourth quarter of 2014.
By the end of 2014, home prices had generally moderated to a healthy, more sustainable level of growth – but prices are now picking up again, says Lawrence Yun, NAR's chief economist.
"Sales activity … was notably higher than a year ago, as steady hiring and low interest rates encouraged more buyers to enter the market," Yun says. "However, stronger demand without increasing supply led to faster price growth in many markets. Sales could soften slightly in some of these markets seeing sharp price appreciation unless housing supply markedly improves and tempers its unhealthy level of growth."
The median existing single-family home price in the first quarter was $205,200 nationwide, up 7.4 percent from the first quarter of 2014. Meanwhile, total existing-home sales decreased 1.8 percent to a seasonally adjusted annual rate of 4.97 million over the same timeframe.
Inventories remain tight. By the end of the first quarter, 2 million existing homes were available for sale, with the average supply during the first quarter at 4.6 months – a decline from 4.9 months a year earlier. Most economists consider a 6- to 7-month supply to be a healthy balance between buyers and sellers.
"Homeowners (have accumulated) household wealth through the steady rise in home values in the past few years," Yun says. "However, some homeowners are hesitant to move up and sell, because they aren't confident they'll find another home to buy. This trend – in addition to subpar homebuilding activity – is leading to the ongoing inventory shortages and subsequent run-up in prices seen in many markets."
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