Double-digit growth arrives in more cities, but affordability worries emerge amid thin supply
By LAURA KUSISTO
Updated May 11, 2015 7:31 p.m. ET
The number of metropolitan areas that saw double-digit percentage increases in home prices more than doubled during the first quarter, reflecting a mix of thin supply and strong demand that points to heated competition for home buyers.
Fifty-one metro areas posted year-over-year double-digit price increases compared with 24 metro areas in the fourth quarter of 2014 and 37 in the first quarter a year ago, the National Association of Realtors said Monday.
The double-digit gains were widespread—from an 11% bump in Columbus, Ohio, to a 13% jump in Raleigh-Cary, N.C.—indicating more than just a handful of hot markets.
“It is crazy right now,” said Lisa Hitchcock, a real-estate agent in the Sherman-Denison area of northern Texas that saw a 33% surge in first-quarter home prices. She said she has more than 20 properties currently under contract. “I’m just trying to keep my head above water.”
The accelerating gains are a welcome sign for the spring selling season—a crucial period for sales because families typically want to lock in to a school district by the end of summer—and an early indication that the moderating gains of the past few years might be picking up. But affordability concerns could keep many would-be buyers out of the market.
Nationally, the median sale price of an existing, previously owned single-family home was $205,200 in the first quarter, up 7.4% from a year ago, according to the NAR report. Median prices rose in 148 out of 174 metropolitan statistical areas tracked by the group.
During the first quarter, the supply of homes for sale was enough to last just 4.6 months, down from 4.9 months a year ago. Economists generally see a supply of 6 to 7 months as representing a healthy balance of supply between buyers and sellers.
In Winston-Salem, N.C., where prices are up more than 15%, broker Eric Munger said that clients are becoming discouraged by the lack of inventory. He said one client recently decided to renew his lease for six months because he couldn’t find a house to match his criteria.
“We’re encouraging them to make the move anyway if they can find a home that doesn’t meet all their criteria but [meets] most of it. They can make improvements and changes that make it more of a right fit for them,” he said.
Lawrence Yun, the Realtor group’s chief economist, said the current supply shortage could pose long-term challenges. “Sales could soften slightly in some of these markets seeing sharp price appreciation unless housing supply markedly improves and tempers its unhealthy level of growth,” he said.
News Corp, owner of The Wall Street Journal, also owns Move Inc., which operates a website and mobile products for the National Association of Realtors.
Many economists believe the shortage of supply will begin to prompt builders to respond, particularly with homes targeted to people of more moderate income levels.
“I expect home builders to ramp it up, particularly at the lower price points,” said Mark Zandi, chief economist at Moody’s Analytics, a unit of Moody’s Corp. “They’ve been pretty aggressive at building high-end housing but they will and they are beginning to build more low- and mid-priced inventory.”
New single-family home construction is up significantly from the trough to 648,000 new homes built in 2014, up from 2011 when builders broke ground on just 431,000 single-family homes. That is still about half of typical new home construction levels and well below the 2005 peak of 1.7 million homes a year, according to the National Association of Home Builders.
But builders disagree that a lack of new construction the sole factor for an unbalanced housing market. They blame relatively weak demand because of a relatively sluggish job market, young people putting off homeownership and people hesitating to put their homes on the market because they still can’t get prices to match what they paid during the boom.
David Crowe, chief economist for the NAHB, said that in some cases people simply can’t sell their homes and buy a new one because their unemployed or underemployed children can’t move out.
“It’s much harder to sell your house if you can’t kick your kids out,” he said.
Pat Hamill, chief executive of Oakwood Homes, a Denver-based home builder, said that he has ramped up construction significantly in response to a shortage of inventory. In 2015, Mr. Hamill expects to complete 1,200 homes, up from 843 last year. During the depths of the downturn his company built just over 200 homes.
But Mr. Hamill said it will likely take several more years before builders have the capacity to fully meet demand. “We lost a lot of builders, lost a lot of trade contractors, we lost a lot of people to other industries,” he said of the lingering impact of the 2007-09 recession.
Meanwhile, Ms. Hitchcock, the real-estate agent in northern Texas, is turning her focus to a growing buyer group: retirees.
Indeed, retirees drove demand in warmer states in the southern and western parts of the country, such as Port St. Lucie, where prices shot up nearly 23%, and the Charlotte, N.C., area where prices were up by 18%.
In Sherman-Denison, a quiet area on Lake Texoma near the Oklahoma border, Ms. Hitchcock said that she saw a surge of interest from retirees in January, when the real-estate market is typically sleepy.
To better serve the retiree market, she said she is taking two courses specializing in selling real-estate to seniors, as new subdivisions are popping up on rural land to help meet demand.
“People are wanting to retire here because it’s a slower pace of life,” said Ms. Hitchcock, who showed eight properties on Monday afternoon alone.
http://teamtreasurecoast.com/wp-content/uploads/2015/09/340-1561.jpg00adminhttp://teamtreasurecoast.com/wp-content/uploads/2015/09/340-1561.jpgadmin2015-05-21 18:34:082015-05-21 18:46:26Home Prices Start to Heat Up in Port St. Lucie