Supply crunch accelerates home price growth

by Ryan Smith04 Nov 2016
The national median home price hit a new peak in the third quarter and home price appreciation accelerated – driven largely by persistent supply shortages, according to new data from the National Association of Realtors. The NAR also found that seven of the nation’s 10 most expensive housing markets are in the West – led by Jan Jose, Calif., where the median price for a single-family home was $1 million for the second straight quarter.

The median price for existing single-family homes went up in 87% of the markets tracked by NAR, with 155 out of 178 metro areas showing gains on closed sales compared to the third quarter of 2015. Just 22 metro areas (12%) saw lower median prices than a year ago.

Twenty-five metro areas saw double-digit price appreciation. In the third quarter of 2015, 21 metro areas posted double-digit gains.

“Mortgage rates around historical lows and solid local job creation created a winning formula for sustained homebuying demand all summer long,” said Lawrence Yun, NAR chief economist. “Unfortunately for house hunters in several of the top job producing metro areas around the country, deficient supply levels limited their options and drove prices higher — especially in markets in the West and South.”

The national median price for existing single-family homes in the third quarter hit a new quarterly peak at $240,900, according to the NAR. That’s up 5.2% from a year prior and surpasses Q2’s median price of $240,700.

But tight inventory is dragging sales, according to the NAR. Total existing-home sales dropped 2.2% in the third quarter to a seasonally adjusted annual pace of 5.38 million, down from 5.5 million in Q2 and lower than Q3 2015’s pace of 5.4 million.

“After climbing to their highest annual pace in over nine years in June3, sales sputtered in the third quarter because inventory could not catch up with what was being quickly sold,” Yun said. “Only a decent rebound in September kept the monthly and annual sales declines from being even larger.”
 

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