The falling temperature of the chilling winter months doesn’t seem to have lowered home prices. In the fourth quarter, prices for single-family homes increased in 73 percent of American cities, a sign that we are still on track for recovery.
But, that’s a much slower pace compared with the 88 percent jump in the previous three months. Experts say the slower increases will probably be the trend in the future.
“The housing market is still on a recovery path and that recovery is not done,” Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York, told Bloomberg before the numbers were released. “At the same time, the pace of those increases should slow.”
The slowdown is probably a welcoming change for potential homeowners who were priced out of the market because of soaring price tags. According to the National Association of Realtors®, the median transaction price for a previously occupied single-family home climbed in 119 out of 164 metropolitan areas.
Over the last few years, the housing market has steadily improved because of tight inventories and job growth. The accelerated growth would have continued, but rising mortgage rates have dampened enthusiasm among homebuyers. In addition, a tighter inventory has triggered a rise in home values faster than people’s incomes. Nationwide, the median price of a previously occupied home skyrocketed 10.1 percent to $196,000 in the fourth quarter. In the third quarter, prices rose 12.1 percent, according to the National Association of Realtors®.
Atlanta, Ga., with a 33 percent increase, and Sacramento, Calif., with a 30 percent hike, registered the biggest price jumps in the nation. The biggest declines happened in Elmira, N.Y., where prices plummeted 12 percent compared to a year-ago period, and the Champaign-Urbana area of Illinois, where prices fell 11 percent.
According to NAR, about 26 percent of areas registered double-digit price gains. That’s a decrease from 33 percent in the previous quarter.
The affordability index , which measures median prices, family incomes and mortgage rates, dropped to 175.8 in 2013 from a record high of 196.6 in 2012. According to Bloomberg, a measure of 100 indicates that the median-income household can qualify for a median-priced existing home. The higher the index, the stronger the household purchasing power, the report said.
Home Equity Rises
After some troubling times with home values, the market seems to be turning a corner. Over the past two years, the vast majority of homeowners saw significant increases in home equity. That trend is essential for boosting consumer confidence and infusing life into the market.
“That’s helping the economy through increased consumer spending,” Lawrence Yun, chief economist at NAR, said in the report.
“At the same time, home prices have been rising faster than incomes, while mortgage interest rates are above the record lows of a year ago,” Yun said. “This is beginning to hamper housing affordability.”
San Jose, Calif., with a median single-family home price of $775,000, was the most expensive housing market in the country in the fourth quarter, followed by San Francisco, Honolulu, Anaheim-Santa Ana in California, and San Diego.
The least expensive metropolitan area was Toledo, Ohio, where median single-family homes are valued at $80,500, followed by Rockford, Ill.; Cumberland, Md.; and Elmira, N.Y.
Read More: realestate.com