Most of the nation saw moderate home sales growth in the fourth quarter which had little impact on the accelerating home prices, according to the National Association of Realtors
NAR reports home sales falling 5.4 percent in the fourth quarter compared to the third quarter, yet 2.4 percent higher than Q4 of 2014. The median existing home price rose 6.9 percent in 2015, hitting $222,700.
Home prices increased in 81 percent of markets in the final quarter of the year, with 8.0 percent of measured metropolitan statistical areas (MSAs) up compared to Q4 of 2015, and 19 percent recording lower median prices from a year earlier.
Price growth “reawakened” in Q4
Dr. Lawrence Yun, NAR chief economist, says faster price growth reawakened in the final months of 2015 despite the pace of sales slowing from earlier in the year.
“Even with slightly cooling demand, the unshakeable trend of inadequate supply in relation to the overall pool of prospective buyers inflicted upward pressure on home prices in several metro areas,” he said.
Dr. Yun notes that homeownership remains out of reach for a number of qualified buyers that live in costly areas, particularly parts of the South and especially on the West Coast. “Without a significant ramp-up in new home construction and more homeowners listing their homes for sale, buyers are likely to see little relief in the form of slowing price growth in the months ahead.”
Affordability, availability will be a challenge
As home prices rise, affordability took a hit in the final quarter of 2015. NAR illustrates by noting that “To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $49,535, a 10 percent down payment would require an income of $46,928, and $41,714 would be needed for a 20 percent down payment.”
Dr. Yun asserts that employment stats are improving, but “With price appreciation likely to continue at the same pace – and even higher in some markets – incomes need to rise even more to keep affordability conditions from declining further.”
NAR President Tom Salomone says that the main challenge for buyers so far in 2016 continues to be insufficient supply.
“With the exception of some metro areas with jobs heavily reliant in the energy sector, Realtors® say demand has held steady during the winter months,” he said. “Serious buyers should be prepared to act fast, and remain in close communication with a Realtor® to deploy a negotiation strategy that fits their budget. Even in these typically slower winter months, listings in affordable price ranges are going under contract quickly.”
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