U.S. home prices posted strong gains in the fourth quarter of 2012, yet conditions remain highly affordable. Learn more about this and other real estate market trends.
Despite a 10 percent increase in U.S. home prices in the fourth quarter of 2012, housing remains highly affordable, according to the latest real estate market trends reported today by the National Association of Realtors.
The median price for an existing single-family home rose from $162,000 to $178,900 in the fourth quarter of 2012, the biggest year-over-year price increase since the fourth quarter of 2005, the association reported. Increases were seen across most of the 152 metropolitan areas tracked by the report, indicating real estate market trends are improving across most of the United States.
While 19 of the metropolitan areas (22 percent) experienced declines in home values – based on closing prices in the fourth quarter of 2012 compared to the same period in 2011 – 133 markets (88 percent) saw increases. In comparison, less than 30 of the markets posted gains in 2011.
The price increases are fueled by a number of real estate market trends, according to Lawrence Yun, chief economist for the association. “Home sales are on a sustained uptrend, mortgage interest rates are hovering near record lows and unsold inventory is at the lowest level in 12 years,” he said.
Pent-up demand, an improving job market, relatively affordable buying conditions and rising rents are also increasing demand for homes, Yun said. New home construction would help relieve some of the pressure on prices, Yun said. “Our population has been growing faster than overall housing stock, so supply and demand dynamics are very much at play.”
Inventory of existing homes available for sale stood at 1.82 million at the end of 2012, a drop of 21.6 percent compared to inventory at the end of 2011, the association reported. At the same time, housing affordability – the relationship between medium home price, median family income and average mortgage rates – rose to record highs. The association’s Housing Affordability hit a record high of 193.5 in 2012 up from 186.4 last year. According to Yun, affordability is expected to remain near record levels through 2013, despite rising prices.
In other real estate market trends, existing home sales rose 5 percent in the fourth quarter to a seasonally adjusted annual rate of 4.9 million. That’s 12 percent higher than the 4.37 million pace for the fourth quarter of 2011.
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