Housing Affordability Still Remains High, Despite Rising Home Prices

national housing affordabilityHome prices in 150 U.S. cities saw their biggest year-over-year gains in more than seven years in the first quarter of 2013, but affordability still remains high in most markets, according to the National Association of Realtors (NAR).  The NAR reported that the national median price for an existing, single family house was $176,600 in the first quarter, up 11.3 percent from the first quarter of 2012.  That was the biggest year-over year gain since the end of 2005.  The National Association of Realtors examined closings in 150 metro areas, and found that median sale prices rose in 133 of them, while 17 saw declines.
“The supply/demand balance is clearly tilted toward sellers in a good portion of the country,” said Lawrence Yun, NAR’s chief economist in a statement.  “Some of the previously hard-hit markets like Phoenix, Sacramento and Miami continue to experience a dramatic turnaround, while a new set of areas like Atlanta, Minneapolis and Seattle have begun to show signs of upward momentum.”
The NAR’s quarterly reports on median pricing are a good measure of where prices in certain markets are headed generally, but their results can sometimes overstate the magnitude of price gains because they don’t control for shifts in the number of low-priced homes versus high-priced homes that are sold each quarter.  A comparable study showed that despite the economic downturn of recent years, low mortgage interest rates and consistent wages have given home buyers in the U.S. “ample buying power” in the current market, according to NAR.
Credit still remains tight for some buyers, especially those with damaged credit scores and those who are not able to save enough for a large down payment.  Prices have also risen in large part because inventories of homes for sale have plummeted.  The number of homes for sale in March totaled 1.93 million, the lowest level of inventory for the month of March since 2000.  Low inventories in some markets have sparked bidding wars among buyers and bolstered sales of newly built homes, which rose in March to their second-highest monthly sales pace in three years.