Housing Market in Transition

Conditions for home buyers improved during the third quarter as existing single-family home prices in many metropolitan areas experienced corrections. NAR’s report on third-quarter metropolitan area single-family home prices — examining changes in 148 metropolitan statistical areas — shows 102 metros experienced price gains. Of those, 21 posted double-digit annual increases. Forty-five areas reported price declines; one was unchanged.

The largest single-family home price increase was in the Salem OR area, where the third quarter price of $228,000 was 24.7 percent higher than in the third quarter of 2005. Next was Elmira NY– at $93,600 – a price increase of 21.4 percent from the third quarter of 2005. The Salt Lake City also boasted a price increase with a third quarter median price of $216,300, a 19.2 percent over the last four quarters.

The second most expensive area was the San Jose-Sunnyvale-Santa Clara area of California, at $747,400, followed by the Anaheim-Santa Ana-Irvine area (Orange Co. CA), at $705,000. For comparison, the national median existing single-family home price was $224,900 in the third quarter, down 1.2 percent from a year earlier when the median price was $227,600.

NAR analysts expect the “buyer’s market” to continue in the months ahead. This window of opportunity will continue into the new year. But inventories are starting to decline. Sellers will be less willing to negotiate when conditions begin to balance in most areas around early spring. Home price appreciation should turn positive in most of the country in 2007.

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The Truth About Home Prices

Home prices have come down. The 1.7 percent national price decline in August (from a year ago) was the first price decline since April 1995 when prices declined 0.1 percent for one short month. Prices also declined previously to that in both 1992 and 1993, but again for only a single month. The only sustained price decline was a mere two straight months in 1990. There have been no other nationwide price declines since NAR began tracking the data in 1968.

Brighter Days Ahead
As for the national picture, the elevated inventory will be worked off over the next two quarters. Wages are rising at better than 4 percent and jobs continue to be created – not robustly – but nonetheless respectably with 1.7 million net new payroll jobs in the past 12 months. With home prices falling, the demand will inevitably pick up. The low point will be the fourth quarter of this year. Sales will then steadily climb and with it will come strengthening home prices. In summary, the housing slump is nearly over.

Read more at: http://www.realtor.org/reioutlook.nsf/pages/forecast?opendocument