Home prices are continuing to rise in the United States with the median value for a single family home reaching more than $1 million in a metro location for the first time.
The record prices was reached in San Jose, California, while the vast majority of metro areas seeing prices rise in the second quarter of 2016, the data from the National Association of Realtors shows.
Overall the median existing single family home price increased in 83% of measured markets, with 148 out of 178 metropolitan statistical areas showing gains based on closed sales in the second quarter compared with the second quarter of 2015.
Just 29 metros recorded lower median prices from a year earlier and 25 saw double digit increases.
According to Lawrence Yun, NAR chief economist, a faster pace of home sales amidst languishing inventory levels has pushed home prices higher in most metro areas during the second quarter.
‘Steadily improving local job markets and mortgage rates teetering close to all-time lows brought buyers out in force in many large and middle tier cities,’ he said. ‘However, with homebuilding activity still failing to keep up with demand and not enough current homeowners putting their home up for sale, prices continued their strong ascent and in many markets at a rate well above income growth,’ he added.
The national median existing single family home price in the second quarter was $240,700, up 4.9% from the second quarter of 2015, which was previously the peak quarterly median sales price. The median price during the first quarter of this year increased 6.1% from the first quarter of 2015.
Total existing home sales, including single family and condos, rose 3.8% to a seasonally adjusted annual rate of 5.5 million in the second quarter from 5.3 million in the first quarter of this year and are 4.2% higher than the 5.28 million pace during the second quarter of 2015.
‘Primarily from repeat buyers moving up or trading down, existing sales increased each month last quarter and could’ve been even higher if not for a few speedbumps. Closings were slowed a bit by meagre supply levels and home prices in many areas that are still rising too fast,’ Yun explained.
At the end of the second quarter, there were 2.12 million existing homes available for sale, which was below the 2.25 million homes for sale at the end of the second quarter in 2015. The average supply during the second quarter was 4.7 months, down from 5.1 months a year ago.
According to Yun, without enough new construction being built, existing inventory seriously failed to keep up with the growing demand for buying. As a result, homes typically stayed on the market for around a month throughout the second quarter and over 40% of listings sold at or above list price, with June being the highest share since NAR began tracking in December 2012.
Yun pointed out that many listings in a majority of market, and especially those in lower price ranges, had multiple offers and went under contract quickly because of severely inadequate supply.
‘This in turn dented affordability and without a doubt priced out a segment of buyers attempting to seek relief from fast-growing rents,’ he said.
Despite falling mortgage rates and a small increase in the national family median income, swiftly rising home prices caused affordability to decline in the second quarter compared to a year ago, the data also shows.
To purchase a single family home at the national median price, a buyer making a 5% down payment would need an income of $52,255, a 10% down payment would require an income of $49,504, and $44,004 would be needed for a 20% down payment.
The five most expensive housing markets in the second quarter were the San Jose, California, metro area, where the median existing single family price was $1,085,000, San Francisco at $885,600, Anaheim-Santa Ana in California at $742,200, urban Honolulu at $725,200 and San Diego at $589,900.
The five lowest-cost metro areas in the second quarter were Youngstown-Warren-Boardman in Ohio at $85,400, Cumberland in Maryland at $94,900, Decatur in Illinois at $95,600, Binghamton in New York at $105,500, and Rockford in Illinois at $109,000.
The national median existing condo price was $227,200 in the second quarter, up 4.8% from the second quarter of 2015 and 44, or 75%, showed gains in their median condo price from a year ago while 14 areas had declines.
According to NAR President Tom Salomone, the further decline in mortgage rates in recent months is bringing new buyers into the mix on top of the pool of those who have yet to close on a home because of insufficient supply.
A breakdown of the figures shows that total existing home sales in the Northeast jumped 7.6% in the second quarter and are 11.3% above the second quarter of 2015. The median existing single family home price was $273,600 in the second quarter, up 1.6% from a year ago.
In the Midwest, existing home sales leaped 10.4% in the second quarter and are 6.6% higher than a year ago. The median existing single family home price increased 5.1% to $191,300 in the second quarter from the same quarter a year ago.
Existing home sales in the South inched forward 0.3% and are 4.2% higher than the second quarter of 2015. The median existing single family home price was $214,900, some 5.9% above a year earlier.
In the West existing home sales were up 1.4% but are 2.2% below a year ago. The median existing single family home price increased 6.5% to $346,500 year on year.
