A combination of affordability and favorable inventory conditions is creating a more balanced climate in the U.S. residential real estate market, according to the National Association of Realtors. The NAR’s national Housing Affordability Index, based on the relationship between mortgage rates, average income and house prices, reached a record high by the end of 2011. An increase in jobs and greater affordability is spurring sales across the Midwest, particularly in the Dakotas and Texas. Areas along the coast have higher home prices and lower affordability, which hampers sales, but experts believe the balance should encourage wider market sentiment. For more on this continue reading the following article from Property Wire.
Housing affordability conditions improved in most metropolitan areas in the United States in the final quarter of 2011 with rising sales and lower inventory creating more balanced conditions, according to the latest report from the National Association of Realtors.
The median existing single family home price rose in 29 out of 149 metropolitan statistical areas (MSAs) in the fourth quarter from a year earlier. Two were unchanged and 118 areas had price declines.
According to Lawrence Yun, NAR chief economist, the figures reflect greater home sales activity at lower price points. ‘Sales have risen strongly in lower price ranges from one year ago, while sales at the upper end remain sluggish,’ he said.
‘More importantly, we’re seeing a consistent trend of declining inventory, which means supply and demand conditions are becoming more balanced in more areas, which will help stabilize home prices,’ he added.
The national median existing single family home price was $163,500 in the fourth quarter, down 4.2% from $170,600 in the fourth quarter of 2010. The median is where half sold for more and half sold for less.
Distressed homes, that is foreclosures and short sales which sold at discounts averaging 15 to 20%, accounted for 30% of fourth quarter sales compared with 34% a year earlier.
‘Broadly speaking, the very middle of the country, from the Dakotas and Nebraska to Oklahoma and Texas, has experienced very stable home price trends because of stronger job creation in those areas,’ Yun said.
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Total existing home sales, including single family and condo, increased 5.9%to a seasonally adjusted annual rate of 4.42 million in the fourth quarter from 4.17 million in the third quarter and were 9.2% above the 4.04 million pace during the fourth quarter of 2010. All regions rose from the third quarter and from a year ago.
At the end of the fourth quarter there were 2.38 million existing homes available for sale, which is 21.2% lower than the close of the fourth quarter of 2010 when there were 3.02 million homes on the market.
NAR’s national Housing Affordability Index rose to a record high of 184.5 in 2011, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power; recordkeeping began in 1970.
Metro areas with the greatest housing affordability conditions in 2011 include the Detroit-Warren-Livonia area of Michigan, with an index of 383.4, Toledo, Ohio, at 242.9 and Decatur, Illinois, at 236.8. Only 24 out of 152 metros measured had an affordability index below 100 in 2011.
‘Clearly, the Midwest has the greatest concentration of areas where home buyers have the strongest purchasing power, followed by the South. Metros on the West Coast and along the North eastern seaboard have generally higher priced homes, which account for lower affordability,’ said Yun.
Between 2010 and 2011, in markets where comparisons are available, all but two out of 148 areas showed improvement in housing affordability, and 69 MSAs had double digit increases in affordability conditions.
The share of all cash home purchases in the fourth quarter was 29%, unchanged from the third quarter and similar to the 30% in the fourth quarter of 2010. Investors, who are drawn by bargain prices and account for the bulk of cash purchases, accounted for 19% of transactions.
First time buyers purchased 33% of homes in the fourth quarter compared with 32% percent in both the third quarter and the fourth quarter of 2010.
Regionally, existing home sales in the Northeast rose 6.3% in the fourth quarter and are 3.7% above the fourth quarter of 2010. The median existing single family home price in the Northeast fell 4.6% to $229,200 in the fourth quarter from a year ago.
In the Midwest, existing home sales increased 7% in the fourth quarter and are 14.1% higher than a year ago. The median existing single family home price in the Midwest declined 3.3% to $134,100 in the fourth quarter from the fourth quarter in 2010.
Existing home sales in the South rose 3.8% in the fourth quarter and are 9.1% above the same quarter in 2010. The median existing single family home price in the South was $146,500 in the fourth quarter, down 3.8% from a year earlier.
Existing home sales in the West increased 8.1% in the fourth quarter and are 8.4% higher than a year ago. The median existing single family home price in the West declined 4.2% to $205,200 in the fourth quarter from the fourth quarter of 2010.
This article was republished with permission from Property Wire.