Home Prices Cool But Appreciation Remains Strong

Metro Home Prices Begin to Cool but Appreciation Remains Strong
NAR: REALTOR® Magazine Online
The growth in single-family home prices continued to cool in the first quarter, but many metropolitan areas are still showing double-digit annual gains, according to the latest survey by National Association of Realtors®. At the same time, metro area condo price appreciation has generally cooled to normal levels.

The association’s first-quarter metro area single-family home price report, covering changes in 149 metropolitan statistical areas,* shows 60 areas with double-digit annual increases and 16 metros experiencing price declines.

The national median existing single-family home price was $217,900 in the first quarter, up 10.3 percent from a year earlier when the median price was $197,600. The median is a typical market price where half of the homes sold for more and half sold for less. In the fourth quarter of 2005, the annual rate of home-price appreciation was 13.6 percent.

David Lereah, NAR’s chief economist, said the market is responding to the improvements in inventory. “With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices,” he said. “By the time we report second quarter data, I expect most areas will be returning to normal rates of price growth in the single-digit range. Consumers generally can expect normal price appreciation for the foreseeable future, providing solid returns over time.”

Metro area condominium and cooperative prices, covering changes in 56 markets, show the national median existing condo price was $224,100 in the first quarter, up 5.2 percent from a year earlier. Twenty-seven metros showed double-digit annual gains in the median condo price, and five areas had declines.

NAR President Thomas M. Stevens said inventories have picked up more strongly in the condo sector. “Although we continue to have areas of hot growth, we’re finding more broadly balanced conditions across the country in the condo market,” said Stevens, senior vice president of NRT Inc.

“Condos have good fundamentals given the demographics of buyers, with baby boomers focused on the high end and their kids on more affordable units. However, in a handful of areas where there may be an oversupply, prices may level-out, so the longer your time horizon the better your investment,” Stevens said.

The national condo price is higher than the median single-family home price because there is a high concentration of condos in the most expensive metropolitan areas. Within a given area, the typical single-family home costs more than the median condo price.

The largest single-family home price increase was in the Phoenix-Mesa-Scottsdale area of Arizona, where the first quarter price of $268,300 rose 38.4 percent from a year ago. Next was Orlando, Fla., at $260,500, up 34.0 percent from the first quarter of 2005. Gainesville, Fla., with a first quarter median price of $210,100, increased 31.9 percent in the last year.

Median first-quarter metro area single-family prices ranged from $52,500 in Danville, Ill., to 14 times that amount in the San Jose-Sunnyvale-Santa Clara area of California, where the median price was $746,800. The second most expensive area was the San Francisco-Oakland-Fremont area at $720,400, followed by the Anaheim-Santa Ana-Irvine area (Orange Co., Calif.), at $712,600.

Other low-cost markets include, Decatur, Ill., the second least-costly metro, at $80,000, and the Youngstown-Warren-Boardman area of Ohio and Pennsylvania, with a first-quarter typical resale home price of $81,100.

In the condo sector, the strongest gains were in the Phoenix-Mesa-Scottsdale area, where the first quarter price of $179,600 rose 38.0 percent from a year ago. In the Honolulu area, the median condo price of $309,000 rose 34.9 percent from the first quarter of 2005, while Miami-Fort Lauderdale-Miami Beach, at $221,500, increased 31.4 percent. The condo price series will be expanded in the future as more data becomes available.

Metro area median existing condo prices ranged from $97,400 in Bismark, N.D., to $615,300 in San Francisco-Oakland-Fremont. The second most expensive reported condo market was Los Angeles-Long Beach-Santa Ana, at $404,600, followed by the San Diego-Carlsbad-San Marcos area of California at $382,200.

Other low cost condo markets include Greensboro-High Point, N.C., at $108,000, and Dallas-Fort Worth-Arlington, at $112,800.
Regionally, the strongest increase in the median existing single-family home price was in the West, where the price rose 12.0 percent to $344,000 during the first quarter. After Phoenix-Mesa-Scottsdale, the strongest increase in the West was in Spokane, Wash., at $172,100, up 26.3 percent, followed by Eugene-Springfield, Ore., at $223,600, up 25.3 percent from the first quarter of 2005, and the Tucson area, at $248,600, up 24.9 percent.

In the Midwest, the first-quarter median existing single-family home price of $158,800 rose 6.7 percent from a year earlier. The strongest metro increase in the Midwest was in Waterloo-Cedar Falls, Iowa, where the median price of $109,700 was 26.8 percent higher than the first quarter of 2005. Next was Decatur, Ill., up 14.3 percent, and Cedar Rapids, Iowa, at $134,600, up 13.4 percent in the last year.

In the Northeast, the median resale single-family home price during the first quarter was $285,200, up 6.6 percent from a year ago. The strongest increase in the region was in Elmira, N.Y., at $88,500, up 18.8 percent from the first quarter of 2005, followed by Trenton-Ewing, N.J., with a median price of $264,900, up 17.5 percent, and Atlantic City, N.J., at $251,700, up 15.8 percent.

In the South, the median existing single-family home price was $179,700 in the first quarter, up 6.6 percent from a year earlier. After the Orlando and Gainesville areas of Florida, the strongest increase in the South was in Ocala, Fla., at $159,800, up 30.8 percent from the first quarter of 2005. Next was the Virginia Beach-Norfolk-Newport News area of Virginia and North Carolina, where the first quarter median price of $221,100 was 27.1 percent higher than a year ago, and Deltona-Daytona Beach-Ormond Beach area of Florida, at $212,600, up 25.4 percent.

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The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.
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*Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. A list of counties included in MSA definitions is available at: http://www.census.gov/population/estimates/metro-city/0312msa.txt

National and regional quarterly prices have been revised back through 1989; the only revision to the metro price series is the normal annual revision for 2005 with revised fourth quarter data. The fixed reporting sample of representative multiple listing services for national and regional data has been updated to reflect geographic changes over time. In addition, regional weights have been updated and aligned to the 2000 Census, but changes in price patterns are consistent with previously reported data.

Regional median home prices include rural areas and samples of many smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.

NAR began publication of metropolitan area median single-family home prices in 1982; the metro area condo price series was launched earlier this year when fourth quarter 2005 data was reported.

Because there is a concentration of condos in high-cost metro areas, the national median condo price is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional area will be included in the condo price report.

Tables of metropolitan area median prices, percent changes and some historic data are available at the site below – under Research, click on Existing Home Sales, then Metropolitan Area Prices.