U.S. home prices continued to rise in the third quarter, but not at the same pace as the previous two quarters, according to recent home price data from the National Association of Realtors (NAR).
The average price for an existing single-family home in the third quarter was $229,000, up 5.5% from $217,100 in the third quarter of 2014.
Home prices increased on a year-over-year basis in 154 of 178 (87%) markets that NAR tracks. This was a decrease compared with the second quarter, when price gains were recorded in 93% of markets tracked.
Meanwhile, 24 markets (13%) saw their median home prices decrease from a year earlier.
There were slightly fewer rising markets in the third quarter. Twenty-one metro areas (12%) experienced double-digit increases, a decrease from the 34 metro areas in the second quarter.
Lawrence Yun, chief economist for NAR, says increased demand for housing as the economy improves combined with tight inventory are boosting home prices in a majority of markets.
‘There's no question the housing market had its best quarter in nearly a decade,’ Yun says in a statement. ‘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. 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.’
Total existing-home sales, including single-family homes and condos, increased 3.4% in the third quarter to reach a seasonally adjusted annual rate of 5.48 million. That's up from 5.30 million in the second quarter and up from 5.06 million in the third quarter of 2014.
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,’ he says.
The five most expensive housing markets in the third quarter were the San Jose, Calif., metro area, where the median existing single-family home price was $965,000; San Francisco ($809,400); Anaheim-Santa Ana, Calif., ($715,300); Honolulu ($714,000); and San Diego, Calif. ($554,400).
The five lowest-cost metro areas in the third quarter were Cumberland, Md., where the median single-family home price was $82,400; Youngstown-Warren-Boardman, Ohio, ($90,700); Decatur, Ill. ($101,400); Rockford, Ill. ($102,800); and Elmira, N.Y., ($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.’
At the end of the third quarter, there were 2.21 million existing homes available for sale, a decreased compared with the 2.28 million homes for sale at the end of the third quarter in 2014. The average supply during the third quarter was 4.9 months – down from 5.5 months a year earlier.