Latest Housing Report Shows Strong Growth

In their latest report, the National Association of Realtors has found that the U.S. housing market posted extremely promising gains in the third quarter of 2015; so promising, in fact, that the Association's chief economist, Lawrence Yun, describes it as housing's best quarter in nearly a decade! What spurred him to deliver such high praise? Despite the ongoing lack of inventory nationwide, sales of existing home increased sharply in the third quarter. At the same time, the rate of price growth, which has been borderline unhealthy in many markets, finally showed signs of slowing down. Keep reading to learn more about the state of the nation's housing market!

Let's begin with a quote from the aforementioned Lawrence Yun on why this quarter was so encouraging: "The demand for buying picked up speed in many metro areas during the summer as more households entered the market, encouraged by favorable mortgage rates and improving local economies," he said. "While price growth still teetered near or above unhealthy levels in some markets, the good news is that there was some moderation despite the stronger pace of sales."

First, let's examine the sales side of this good news. Total existing–home sales, which include single family homes and condos, posted a strong increase from the proceeding quarter, rising 3.4% nationally. In numbers of homes, this translates to a seasonally adjusted annual rate of 5.48 million in the third quarter, up from 5.30 million in the second quarter. The statistics are even more encouraging compared to the third quarter of last year, when home sales only reached 5.06 million, 8.3% below current levels.

Regionally, the largest gains in total existing–home sales were in the Northeast, which posted an increase of 6.4% compared to the second quarter and of 9.1% compared to the third quarter of 2014. The West came in second with quarterly and yearly gains of 3.9% and 9.7% respectively. The South was third (up 3.0% for the quarter and 6.9% for the year), while the Midwest was last (a 2.1% quarterly gain and 9.0% yearly gain).

Although all regions posted increases, Mr. Yun believes that, given the current low mortgage rates and favorable economic conditions, sales could have been even higher last quarter. "Unfortunately, the lack of any meaningful gains in housing supply pushed prices in some areas above what some potential buyers — especially first–time buyers — are able to afford."

Indeed, supply continues to be a major issue in the country's housing market. At the conclusion of the third quarter, there were 2.21 million existing homes available for sale, below the 2.28 million existing homes for sale at the same time last year. The average supply during the third quarter was just 4.9 months, having fallen almost 11% from 5.5 months a year ago.

However, even with the ongoing supply issues, price growth actually managed to moderate in the third quarter. While the median existing single–family home price was up 5.5% from last year to $229,000, this represents a marked slow-down in growth. After all, the median price during the second quarter of this year increased at a much greater rate of 8.2% from the second quarter of 2014.

The regional breakdown in price growth was led by the West (7.3%), followed by the South (6.0%), the Midwest (4.8%), and the Northeast (3.5%). Overall, the median existing single–family home price increased in nearly 87% (154 out of 178) of metropolitan statistical areas compared with the third quarter of 2014.

The most expensive housing markets won't come as much of a surprise, with four of the top five landing in California. Here is a list of the five most expensive housing markets in the third quarter by median sale price:

1. San Jose, California: $965,000
2. San Francisco, California: $809,400
3. Anaheim–Santa Ana, California: $715,300
4. Honolulu, Hawaii: $714,000
5. San Diego, California: $554,400

The five least expensive metro areas were more interesting. In fact, we bet one of them in particular will stand out:

1. Cumberland, Maryland: $82,400
2. Youngstown–Warren–Boardman, Ohio: $90,700
3. Decatur, Illinois: $101,400
4. Rockford, Illinois: $102,800
5. Elmira, New York: $108,800

Source: Home Prices Sustain Steady Growth in Most Metro Areas in Third Quarter