Prices for single-family homes rose in 73% of cities in the fourth quarter, fewer than in the previous three months, as surging values in the past two years started to reduce affordability.
The median transaction price for an existing home climbed from a year earlier in 119 of 164 metropolitan areas measured, the National Association of Realtors said in a report today. In the third quarter, 88% of markets had increases.
While tight inventories and improving employment are bolstering the housing recovery, home-price gains are poised to decelerate as an increase in mortgage rates from record lows cuts into affordability. Values have been rising faster than incomes, particularly in the West, the Realtors group said.
“The housing market is still on a recovery path and that recovery is not done,” Michael Hanson, a senior economist at Bank of America Corp. in New York, said in an interview before today’s release. “At the same time, the pace of those increases should slow.”
The nationwide median price for an existing single-family home rose 10.1% in the fourth quarter from a year earlier to $196,900, the Realtors group said. The gain was 12.5% in the third quarter.
The best-performing areas were Atlanta and Sacramento, Calif., where prices jumped 33% and 30%, respectively. They were followed by Las Vegas and Riverside, Calif., with more than 26% gains.
The areas with the biggest declines included Elmira, New York, where prices fell 12% from a year earlier. Following was the Champaign-Urbana area of Illinois, with an 11% drop.
About 26% of areas had double-digit gains in prices, down from 33% in the third quarter. Areas that had price declines after increases in the previous three months include Cleveland; Spokane, Wash.; Newark, N.J.; and El Paso, Texas.
The Realtors group’s affordability index—a gauge of median prices, family incomes and mortgage rates—fell to 175.8 in 2013 from a record high 196.6 in 2012. A measure of 100 means that the median-income household has enough income to qualify for a median-priced existing home. The higher the index, the stronger the household purchasing power.
“The vast majority of homeowners have seen significant gains in equity over the past two years, which is helping the economy through increased consumer spending,” Lawrence Yun, chief economist of the Realtors group, said in the report. “At the same time, home prices have been rising faster than incomes, while mortgage interest rates are above the record lows of a year ago. This is beginning to hamper housing affordability.”
The most expensive housing market in the fourth quarter was San Jose, Calif., where the median single-family price was $775,000. It was followed by San Francisco, Honolulu, Anaheim-Santa Ana and San Diego. The lowest-cost metropolitan area was Toledo, Ohio, with a median single-family price of $80,500, followed by Rockford, Ill.; Cumberland, Md.; and Elmira, N.Y.