It’s getting more expensive to buy a house. Prices rose 6% in the fourth quarter of 2014 as buyers competed for fewer and fewer available homes for sale, according to new data from the National Association of Realtors®.
The NAR report shows most cities (86%) are experiencing rising prices, with fewer available homes to choose from. Just 24 cities, or 14%, recorded lower median prices in 2014 than in 2013.
“Home prices in metro areas throughout the country continue to show solid price growth, up 25% over the past three years on average,” said Lawrence Yun, chief economist at NAR. “This is good news for current homeowners but remains a challenge for buyers who are seeing home prices continue to outpace their wages.”
Still, as more jobs are created, consumer confidence rises, driving the demand for housing. But with fewer sellers putting their homes on the market, the housing market just chugs along.
“This should signal existing home owners, who may have been slow to think of selling, to consider now a great time to list,” said Jonathan Smoke, chief economist atrealtor.com®. With prices rising by double digits in 24 areas across the country, according to the report, many sellers would find a pool of buyers vying for their homes.
To be sure, Smoke scoured 200 of the largest metro areas across the country onrealtor.com and found that the prices in 98 of them had increased by 6% or more. In 66 of those markets, houses are spending 8% less time on the market, he said.
Prices and inventory go hand in hand. The average supply of available homes for sale was 4.9 months’ worth, according to the report. In a normal market, there would be a six- to seven-month supply of available homes.
“This is a clear sign that demand is growing faster than supply,” said Smoke. Once more homes are listed, prices would moderate, he said.
The NAR wants more new construction. “Unless homebuilders significantly boost construction, housing supply shortages could develop and lead to further price acceleration this spring,” said Yun.
The five most expensive housing markets in the fourth quarter of 2014, according to the report, were:
San Jose, CA, $855,000
San Francisco, CA, $742,000
Honolulu, HI, $701,300
Anaheim-Santa Ana, CA, $688,500
San Diego, CA, $493,100
The five lowest-cost metro areas were:
Youngstown-Warren-Boardman, OH, $78,000
Rockford, IL, $86,800
Toledo, OH $87,100
Decatur, IL $90,400
Cumberland, MD, $90,500
Housing demand is rising as buyers look to take advantage of low interest rates and a slight uptick in median income ($65,782). To afford a single-family home at the national median price of $208,700, a buyer making a 5% down payment would need an income of $45,863, while a 10% down payment would require an income of $43,449 and $38,621 for a 20% down payment, according to the report.
In the Northeast, sales rose 2.5% in the fourth quarter of 2014 but are 4.1% below the fourth quarter of 2013, according to the report. The median price of the home rose 2.2% to $246,300.
In the Midwest, sales of existing homes declined 4.7% in the fourth quarter and are 0.6% below their 2013 level. The median price of an existing single-family home in the Midwest increased 6.2% to $162,000.
In the South, sales climbed 2.7% in the fourth quarter of 2014 and were 5.8% over 2013 levels. Median prices also increased 6.2% to $183,000, according to the report.
In the West, sales fell 6%; however, the median price of a home jumped 4.8% to $299,500 in the fourth quarter.