Median Home Price Continues to Rise
Last Friday, the National Association of Realtors® reported that its measure of existing-home sales fell in January to the lowest level in a year-and-a-half. Ongoing inventory shortages continue to lift prices in many parts of the United States. Last month’s level of activity was the slowest since July 2012 for a variety of reasons, according to NAR’s Chief Economist, Lawrence Yun.
Total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 5.1% to a seasonally adjusted annual rate of 4.62 million in January from 4.87 million in December, and are also 5.1% below the 4.87 million-unit pace in January 2013. In July 2012, when existing home sales stood at 4.59 million.
Yun, NAR’s chief economist, said unusual weather is playing a role. “Disruptive and prolonged winter weather patterns across the country are impacting a wide range of economic activity, and housing is no exception,” he said. “Some housing activity will be delayed until spring.” However, he added, we can’t ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates. These issues will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact.”
The national median existing-home price for all housing types in January was $188,900, up 10.7% from January 2013. Distressed homes – foreclosures and short sales – accounted for 15% of January sales, compared with 24% in January 2013. In addition to fewer distressed properties, homes selling now may have more bedrooms, square footage, and other valuable amenities than homes that were sold last year had. The median home price, which is simply the price of the home where 50% of all homes sold were priced above and 50% were priced below that sales price, can be deceiving as well as useful.
The median price is useful because it can be done quickly and it has proved itself to be a reliable leading indicator of other price indices that are more complex to calculate and may not be available in small markets like Flagstaff. Breaking home sales down into price ranges allows analysis that may be hidden by simply looking at an increase in median price. I do this each month in my monthly Flagstaff Home Sales Report and NAR, this month, looked at the change in sales from a year ago by price range.
This month, both in Flagstaff home sales and in national home sales, we see that the median price is affected by the increasing number of higher priced homes being sold. This tells us that the lower priced homes themselves may not be increasing in value as quickly as we’d think. It also tells us that homeowners are willing to put money into higher priced housing again.