A record number of metropolitan areas showed double-digit annual price appreciation in median existing-home prices in fourth-quarter 2004, according to a report by the National Association of Realtors.
The association’s fourth-quarter metro area home-price report, covering 129 metropolitan statistical areas, shows 62 areas with double-digit annual increases in median existing-home prices and only four areas posting modest price declines. The previous record was 49 metros showing double-digit price appreciation in the second quarter of 2004.
The national median existing-home price was $187,500 in the fourth quarter, 8.8 percent higher than a year earlier when the median price was $172,400. In the third quarter of 2004, the national median existing-home price was $188,200 and the national annual rate of home-price appreciation was 7.5 percent. The median is a typical market price where half of the homes sold for more and half sold for less.
For the year of 2004, the median existing-home price in metro areas was $184,100, compared to $170,000 in 2003 and $158,100 in 2002.
David Lereah, chief economist for the national association, said, “We ended 2004 with a record-low supply of homes on the market. With more buyers than sellers nationally, what we’re seeing is a natural pressure on home prices as buyers compete to bid on available properties. Fortunately, the historically low cost of debt service on a home purchase means that we have a comfortable buffer in most of the country because the typical family can afford to buy a home well above the median price.”
The strongest price increase was in the Las Vegas area where the fourth-quarter price of $281,400 rose 47.3 percent from a year earlier. Next came the Riverside-San Bernardino area of California at $322,400, up 34.7 percent from the fourth quarter of 2003. Third was the West Palm Beach-Boca Raton-Delray Beach area of Florida, with a fourth-quarter median price of $338,800, up 34 percent in the last year.
Meanwhile, median existing-home prices dropped 4.2 percent in Charleston, W.V.; dropped 3.9 percent in Indianapolis, Ind.; dropped 2.1 percent in Austin/San Marcos, Texas; and dropped 1.3 percent in Beaumont/Port Arthur, Texas, from fourth-quarter 2003 to fourth-quarter 2004.
Lereah said analysts looking for signs of weakness will be disappointed. “In the handful of areas with price declines, none had previously experienced rapid price growth,” he said. “In fact, they were all lower-cost areas experiencing one or both of the conditions necessary for temporary price softness – local economic weakness, mainly in jobs, or a large supply of homes available in the local market.”
NAR President Al Mansell, CEO of Coldwell Banker Residential Brokerage in Salt Lake City, said market performance has contradicted predictions of a home-price bubble for four years now. “Although temporary price declines are always possible under the right conditions, people who were scared off by faulty predictions have missed out on the strongest housing market in U.S. history,” he said.
“Considering rents on comparable properties generally are higher than mortgage payments, and housing returns generally are multiples of a down payment, a little perspective may help. The population is growing faster than the supply of homes, the cost of construction rarely declines and the long-term prospects are positive – one of the largest generations in U.S. history, who believe housing is a good investment, is just entering the years in which people typically buy their first home.”
Median fourth-quarter metro area resale prices ranged from $87,800 in Beaumont-Port Arthur, Texas, to more than seven times that amount in the San Francisco Bay area where the median price was $656,700. The second most expensive area in the United States was Anaheim-Santa Ana (Orange Co., Calif.) at $627,500, followed by San Diego at $569,900.
Other low-cost markets include Springfield, Ill., the second least-costly area, at $93,600, and Buffalo-Niagara Falls, N.Y., with a fourth-quarter typical resale home price of $94,800.
Regionally, the strongest increase was in the West where the median resale price was $278,000 during the fourth quarter, up 14.1 percent from a year ago. After the Las Vegas and Riverside-San Bernardino areas, the strongest increase in the region was in Sacramento, with a fourth-quarter median price of $343,800, up 31.5 percent from a year earlier, followed by the Reno, Nev., area, where the median price of $286,200 rose 25.5 percent. Twelve other Western metro areas also experienced double-digit price gains, including Los Angeles, San Francisco, Anaheim-Santa Ana, San Diego and Honolulu.
In the Northeast, the median resale price during the fourth quarter was $222,500, rising 13.5 percent from a year earlier. The strongest increase in the region was in the Atlantic City, N.J., area, at $216,500, up 18.9 percent from the fourth quarter of 2003, followed by New Haven-Meriden, Conn., with a median price of $264,600, and Monmouth-Ocean, N.J., at $338,400, both up 16.5 percent, and the Albany-Schenectady-Troy area of New York, where the typical resale price of $168,600 rose 16 percent from the fourth quarter of 2003. Eleven other Northeastern metros had double-digit price gains including the New York City area, Philadelphia, Hartford, Buffalo-Niagara Falls and Providence.
In the South, the median existing-home price of $169,700 was 8 percent higher than the fourth quarter of 2003. After the West Palm Beach-Boca Raton-Delray Beach area, the strongest increase in the South was in the Bradenton area of Florida, where the fourth quarter median price of $245,700 rose 32 percent from a year earlier. Next came the Melbourne-Titusville-Palm Bay area of Florida at $172,200, up 30.5 percent, and the Washington, D.C., area, where the median price of $370,800 was 26.9 percent higher than a year earlier. Twenty-two other Southern metro areas experienced double-digit increases in their median price including Baltimore; the Florida metro areas of Miami-Hialeah, Orlando, Ft. Lauderdale-Hollywood-Pompano Beach, and Tampa-St. Petersburg-Clearwater; New Orleans; Norfolk-Virginia Beach-Newport News, Va.; and Birmingham, Ala.
In the Midwest, the fourth-quarter median existing-home price of $151,000 increased 6.9 percent from the same period in 2003. The strongest increase in the Midwest was in the Waterloo-Cedar Falls area of Iowa, where the median price of $97,900 was 13.2 percent higher than the fourth quarter of 2003. Next came Springfield, Mo., at $109,100 in the fourth quarter, up 12.4 percent, and the Milwaukee area $199,300, up 11.3 percent in the last year. Aurora-Elgin, Ill., and Fargo, N.D., also had double-digit gains.
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