In the third quarter, home price increases slowed down to a “healthier pace,” and home sales experienced an “encouraging lift-off,” despite inventory shortages, according to the National Association of Realtors (NAR).
The median home price rose 5.5 percent over the year to $229,000, as sales rose 3.4 percent in just one quarter, up 8.3 percent from Q3 last year.
Best quarter in nearly a decade
Ending the third quarter, there were 2.21 million existing homes available for sale, which is below the 2.28 million homes for sale at the end of Q3 2014. The average supply during the third quarter was 4.9 months – down from 5.5 months a year ago.
Dr. Lawrence Yun, NAR Chief Economist, says there’s no question the housing market had its best quarter in nearly a decade.
“The demand for buying picked up speed in many metro areas during the summer as more households entered the market, encouraged by favorable mortgage rates and improving local economies,” said Dr. Yun.
He added that “While price growth still teetered near or above unhealthy levels in some markets, the good news is that there was some moderation despite the stronger pace of sales.”
Affordability remains a point of concern
Dr. Yun says sales had the potential to be even higher last quarter given the decline in mortgage rates and favorable economic conditions.
“Unfortunately, the lack of any meaningful gains in housing supply pushed prices in some areas above what some potential buyers – especially first-time buyers – are able to afford,” said Dr. Yun.
NAR has been beating the drum of affordability for some time now, and this quarter is no different as they express concerns about buyers’ ability to become or remain homeowners.
California remains the most expensive
It is no shock that the majority of the most expensive housing markets this quarter were in California:
- San Jose, CA ($965,000)
- San Francisco, CA ($809,400)
- Anaheim-Santa Ana, CA ($715,300)
- Honolulu, HI ($714,000)
- San Diego, CA $554,400
The least expensive markets in the third quarter:
- Cumberland, MD ($82,400)
- Youngstown-Warren-Boardham, OH ($90,700)
- Decatur, IL ($101,400)
- Rockford, IL ($102,800)
- Elmira, NY ($108,800)
“Many of the metro areas with the fastest price appreciation over the past year were in the South – particularly in Florida,” says Yun. “A combination of solid job gains, above average shares of vacation and foreign buyers and little new construction being added was behind these areas’ faster price growth.”