Prices for single-family homes climbed in 88 percent of U.S. cities in the third quarter as buyers competed for limited inventories that included fewer discounted foreclosures.
The median transaction price rose from a year earlier in 144 of 163 metropolitan areas measured, the National Association of Realtors said in a report today. A third of areas had double-digit increases.
Home prices are extending a recovery across the country, fueled by a tight supply of listings and a smaller share of distressed sales, which drag down values. The U.S. housing market had five months of inventory in the third quarter, down from 5.9 months a year earlier, data from the Realtors group show. Completed foreclosures in September plunged 39 percent from a year earlier, according to CoreLogic Inc.
“Most regions of the country are experiencing strong home-price appreciation off a low base,” Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York, said yesterday in a telephone interview. “Cities with the biggest price appreciation are in places that had bigger busts.”
Price gains are at unsustainable levels, with cities such as San Francisco and San Jose, California, approaching records, Fitch Ratings said today in a report. Much of coastal California is more than 20 percent overvalued, the firm said.
The nationwide median price for an existing single-family home rose 12.5 percent in the third quarter from a year earlier to $207,300 the Realtors group said.
The best-performing areas were Sacramento, California, and Atlanta, where prices jumped 41.8 percent. They were followed by Las Vegas and Punta Gorda, Florida, which had a 31.9 percent gain. Other cities with large increases were Los Angeles, with 26.2 percent, and Phoenix, with 25 percent.
The areas with the biggest declines were all in Illinois, led by Peoria, where prices fell 13.9 percent from a year earlier. Following were Kankakee, with a 9.9 percent drop, and Rockford, with an 8.4 percent decrease.
Rising home prices and borrowing costs are causing some buyers to hold back. The average rate for 30-year fixed loans was 4.1 percent last week, up from a near-record low of 3.35 percent in early May, according to McLean, Virginia-based Freddie Mac.
Contracts to buy existing homes dropped the most in more than three years in September, the Realtors association reported last week.
“Rising prices and higher interest rates have taken a bite out of housing affordability,” Lawrence Yun, the group’s chief economist, said in today’s statement. “However, we have the ongoing situation of more buyers than sellers in the market, so lower sales will help to take the pressure off home-price growth and allow them to rise slowly at a single-digit growth rate in 2014.”
San Jose was the most expensive market in the third quarter, with a median home price of $805,000, the Realtors said. Following were San Francisco, at $705,000, and Honolulu, at $679,800.
The most affordable areas were Toledo, Ohio, with a median price of $87,500; Rockford, at $88,900; and Decatur, Illinois, at $91,000.