According to the National Association of Realtors (NAR), home prices in approximately 150 cities demonstrated a propensity for year-over-year gains. The current housing market represents the highest home prices we have seen in over seven years. The national average price for a single-family home was about$176,600 in the first quarter of 2013, up 11.3 percent from this time last year. Despite the resurgence of the housing market, affordability remains in the buyer’s favor, as interest rates and consistent wages continue to facilitate the purchase of a home.
Markets evaluated as boom-or-bust candidates experienced the largest home price gains, as they were initially hit the hardest. Depressed Midwestern towns and regions of California were the beneficiaries of robust job creation. The following geographical regions experienced similar increases within the housing market:
- Prices rose 32.7% in Akron, Ohio
- Prices rose 32.6% in the San Francisco Bay region
- Prices rose 32.1% in Reno-Sparks, Nevada
- Prices rose 31.7% in San Jose
- Prices rose 31.1% in Atlanta
- Prices rose 30.1% in Phoenix
By comparison, prices are continuing their downward trend in the following areas:
- Kankakee-Bradley, Ill. (-18.8%)
- Edison, N.J. (-8.6%)
- Allentown-Bethlehem-Easton, Pa. (-8.3%)
- Champaign-Urbana, Ill (-5.5%)
- Erie, Pa. (-5.0%)
“The supply/demand balance is clearly tilted toward sellers in a good portion of the country,” said Lawrence Yun, NAR’s chief economist, in a statement. “Some of the previously hard-hit markets like Phoenix, Sacramento and Miami continue to experience a dramatic turnaround, while a new set of areas like Atlanta, Minneapolis and Seattle have begun to show strong signs of upward momentum.”
Despite a large majority of markets experiencing rises in home prices, potential buyers are still able to take advantage of record-low interest rates. According to a companion study, low mortgage interest rates and consistent wages have given homebuyers in the U.S. “ample buying power” in the current housing market. Incentives should continue to promote the acquisition of houses for many of the buyers on the housing market.
The Wall Street Journal uses the following example to illustrate how affordable housing has become:
“Assuming a 5 percent down payment, a 3.5 percent mortgage rate, and 25 percent of a gross income devoted to mortgage payments, a buyer would only need an income of $36,500 to buy a house at the median price. With a 10 percent down payment, the required salary falls to $34,600, and with a 20 percent down payment, it falls to $30,700.”
