Positive Picture for Buyers in Third Quarter

NAR Chief Economist David Lereah says market conditions are nearly the opposite of a year ago. "Buyers now have choices and sellers are more willing to negotiate."
REALTOR® Magazine Online
Conditions for buyers improved during the third quarter, as home prices declined in many metropolitan areas, sales activity slowed, and inventory increased, according to the latest quarterly survey by the NATIONAL ASSOCIATION OF REALTORS®.

Total state existing-home sales, including single-family homes and condos, were at a seasonally adjusted annual rate of 6.27 million units in the third quarter, down 12.7 percent from a 7.18 million-unit pace in the third quarter of 2005. Even with the overall decline, 10 states showed increases in sales activity from a year ago.

Among 148 metropolitan statistical areas included in the report, 102 areas had price gains, including 21 metros with double-digit annual increases, and 45 areas experienced price declines; one was unchanged.

David Lereah, NAR’s chief economist, says market conditions are nearly the opposite of a year ago. “Last year we had a record sales market and historically tight supplies of homes with buyers bidding over the asking price,” he says. “With the market in full transition, buyers now have choices and sellers are more willing to negotiate. Under these circumstances it’s no surprise that overall home prices are slightly below a year ago.”

He says the trend will likely continue into the months ahead, although there’s expected to be modest price appreciation in most of the country in 2007.

The national median existing single-family home price was $224,900 in the third quarter, down 1.2 percent from a year earlier when the median price was $227,600. The median is a typical market price where half of the homes sold for more and half sold for less.

Good News for Buyers

The market transition is good news for home buyers, says NAR’s new president, Pat Vredevoogd Combs.

“With the supply of homes at the highest level in over a decade and historically low mortgage interest rates, it’s become a great time to buy a home,” says Combs, vice president of Coldwell Banker AJS Schmidt in Grand Rapids. “This window of opportunity will continue into the new year, but inventories are starting to decline and sellers will be less willing to negotiate when conditions begin to balance in most areas around early spring.”

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 6.56 percent in the third quarter, down from 6.60 percent in the second quarter; the rate was 5.76 percent in the third quarter of 2005. Last week, Freddie Mac reported the 30-year fixed rate was down to 6.24 percent.

Biggest Sales, Price Increases

The biggest total sales increase was in North Carolina, where existing-home sales rose 9.7 percent from the third quarter of 2005. In Texas, the third-quarter resale pace rose 8.6 percent from a year earlier, while Montana experienced the third strongest gain, up 6.4 percent.

The largest single-family home price increase was in the Salem, Ore., area, where the third quarter price of $228,000 was 24.7 percent higher than a year ago. Next was Elmira, N.Y., at $93,600, up 21.4 percent from the third quarter of 2005. The Salt Lake City area, with a third quarter median price of $216,300, increased 19.2 percent in the last year.

Median third-quarter metro area single-family prices ranged from a very affordable $86,000 in both Decatur, Ill., and the Youngstown-Warren-Boardman area of Ohio and Pennsylvania, to nearly nine times that amount in the San Francisco-Oakland-Fremont area where the median price was $749,400.

The second most expensive area was the San Jose-Sunnyvale-Santa Clara area of California, at $747,400, followed by the Anaheim-Santa Ana-Irvine area (Orange Co., Calif.), at $705,000.

In addition to Elmira, N.Y., other affordable markets include South Bend-Mishawaka, Ind., with a third-quarter median price of $96,000, and the Cumberland area of Maryland and West Virginia at $100,900.

Condo Prices Down Slightly

In the condo sector, metro area condominium and cooperative prices – covering changes in 57 markets – show the national median existing condo price was $222,900 in the third quarter, down 2.1 percent from the same period in 2005. Thirty-one metros showed annual increases in the median condo price, including eight areas with double-digit gains; 27 metros had price declines.

The strongest condo price gains were in the Knoxville, Tenn., area, where the third quarter price of $155,700 rose 29.0 percent from a year ago. In Wichita, Kan., the median condo price of $130,300 rose 25.5 percent from the third quarter of 2005, while Albuquerque, N.M., at $153,300, increased 21.0 percent.

Metro area median existing condo prices in the third quarter ranged from $108,200 in Rochester, N.Y., to $600,600 in the San Francisco-Oakland-Fremont area. The second most expensive reported condo market was Los Angeles-Long Beach-Santa Ana, at $384,500, followed by the San Diego-Carlsbad-San Marcos area of California at $361,100.

Other affordable condo markets include Bismarck, N.D., at $109,000, and Greensboro-High Point, N.C., at $113,000.

Regional Sales Data

Regionally, total existing-home sales in the South were at an annual rate of 2.52 million units in the third quarter, down 7.8 percent from a year ago. After the gains in North Carolina and Texas, the next strongest increase in the South was in Louisiana, up 4.5 percent from the third quarter of 2005, while resales in Arkansas rose 4.3 percent; four other Southern states also posted sales gains.

The median existing single-family home price in the South was $187,300 in the third quarter, which is 0.1 percent below a year earlier.

The strongest increase in the South was in the Virginia Beach-Norfolk-Newport News area, where the median price of $243,800 was 16.9 percent above the third quarter of 2005. Next was Gainesville, Fla., at $215,200, up 15.9 percent from a year ago, followed by the Gulfport-Biloxi area of Mississippi, with a 15.7 percent gain to $154,400.

In the Midwest, total existing-home sales declined 11.8 percent to a 1.42 million-unit annual level compared with the third quarter of 2005. The strongest performance in the region was in South Dakota, where sales rose 3.1 percent from a year ago.

The median existing single-family home price in the Midwest was $170,500 in the third quarter, down 2.6 percent from a year earlier. The strongest metro price increase in the region was in the Wichita, Kan., area, where the median price of $127,900 was 15.0 percent higher than the third quarter of 2005. Next was Bismarck, N.D., at $140,400, up 7.4 percent, and Kankakee-Bradley, Ill., at $138,400, up 6.1 percent in the last year.

The Northeast saw an existing-home sales pace of 1.05 million units in the third quarter, which was 12.5 percent below a year ago. The median Northeastern resale single-family home price was $276,000 in the third quarter, which is 4.8 percent below the same period in 2005.

After Elmira, N.Y., the strongest price increase in the Northeast was in Atlantic City, N.J., with a median price of $277,200, up 12.0 percent from the third quarter of last year, followed by Binghamton, N.Y., with a median price of $107,400, up 10.0 percent.

In the West, the existing-home sales pace of 1.29 million units was 21.5 percent lower than the third quarter of 2005. The best performance the region was in Montana where existing-home sales rose 6.4 percent from a year earlier.

The median existing single-family home price in the West slipped 0.9 percent to $349,000 during the third quarter. After Salem, Ore., and Salt Lake City, the strongest increase in the West was in the Seattle-Tacoma-Bellevue area of Washington, at $372,400, up 14.6 percent from third quarter of 2005, followed by Spokane, Wash., at $191,100, up 14.1 percent, and Farmington, N.M., at $176,200, up 12.9 percent from a year ago.