NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said foreclosures are distorting the price data. "In many areas with large concentrations of foreclosure sales, homes are being purchased below replacement cost values," Gaylord said. "Many buyers with long-term expectations are getting exceptional value in the current market. Once the inventory is drawn down, price pressure will return because the costs of construction are rising - today's buyers are very well positioned to build wealth over time."
A separate recent study by the National Bureau of Economic Research, "Housing Supply and Housing Bubbles," shows construction costs in 2007 were higher than home prices in 33 out of 79 metro areas studied.
Because foreclosures and short sales are accounting for about one-third of transactions, there is a downward pull to the national median price. In the second quarter, the median existing single-family home price was $206,500, down 7.6 percent from the second quarter of 2007 when it was $223,500. The median price is where half of the homes sold for more and half sold for less.
Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate of 4.91 million units in the second quarter, down 0.8 percent from 4.95 million units in the first quarter, and were 16.3 percent below a 5.87 million-unit pace in the second quarter of 2007.
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage rose to 6.09 percent in the second quarter from 5.88 percent in the first quarter; the rate was 6.37 percent in the second quarter of 2007.
Lawrence Yun, NAR chief economist, said a clear cause-and-effect response has developed in the housing market. "The biggest home-sales gains over the previous quarter have been in some of the markets with the steepest and fastest price drops," Yun said. Compared with the first quarter, existing-home sales increased 25.8 percent in California, 25.0 percent in Nevada, 20.5 percent in Arizona and 10.1 percent in Florida. "Buyers in these areas are responding to deeply discounted home prices."
The largest sales gain during the second quarter was in Idaho, up 51.7 percent; Virginia sales rose 10.5 percent.
The steepest declines in single-family home prices in the second quarter were in the Sacramento-Arden-Arcade-Roseville area of California, where the median price of $229,500 dropped 35.6 percent from a year ago, followed by Cape Coral-Fort Myers, Fla., at $178,100, down 33.1 percent from the second quarter of 2007, and Riverside-San Bernardino-Ontario, Calif., where it dropped 32.7 percent to $265,200. "Each of these areas has seen a strong buyer response in recent months to the big cuts in home prices," Yun said.
Sharp price declines, in excess of 20 percent, also were reported in the Los Angeles-Long Beach-Santa Ana area; the Anaheim-Santa Ana-Irvine, Calif., area; Las Vegas-Paradise; and Phoenix-Mesa-Scottsdale.
"Areas with affordable housing and healthy local economies continue to see price growth," Yun said. In the second quarter, the largest single-family home price increase was in the Yakima, Wash., area, where the median price of $162,300 rose 8.9 percent from a year ago. Next was the Binghamton, N.Y., area, at $120,900, up 8.7 percent from the second quarter of 2007, followed by the Amarillo, Texas, area, where the second-quarter median price increased 7.2 percent to $124,600.
Yun said home price conditions reflect comparisons from 12 months ago. "Prices having fallen sharply and quickly in very distressed markets, but most or all of the price declines may have already occurred in these areas since buyers have now returned to those markets," he said. "Furthermore, the momentum of buying is likely to continue in light of the housing stimulus package that was recently enacted. About 2.5 million first-time buyers are expected to take advantage of the $7,500 tax credit between now and the middle of next year."
Median second-quarter metro area single-family home prices ranged from a very affordable $71,700 in the Youngstown-Warren-Boardman area of Ohio and Pennsylvania, to nearly 11 times that amount in the San Jose-Sunnyvale-Santa Clara area of California, where the median price was $755,000. The second most expensive area was San Francisco-Oakland-Fremont, at $684,900, followed by Honolulu at $636,000.
Other affordable markets include Elmira, N.Y., at $76,400, and the Saginaw-Saginaw Township North area of Michigan with a second-quarter median price of $80,300.
In the condo sector, metro area condominium and cooperative prices - covering changes in 54 metro areas - showed the national median existing-condo price was $220,000 in the second quarter, down 3.0 percent from $226,900 in the second quarter of 2007. Seventeen metros showed annual increases in the median condo price and 37 areas had price declines.
The strongest condo price increases were in the Syracuse, N.Y., area, where the second quarter price of $144,900 rose 17.8 percent from a year earlier, followed by the New Orleans-Metairie-Kenner area of Louisiana, at $192,100, up 15.9 percent, and the Houston-Baytown-Sugar Land area of Texas, where the median condo price of $141,100 rose 9.9 percent from the second quarter of 2007. Areas where condo prices declined mirrored the pattern seen with single-family homes.
Metro area median existing-condo prices in the second quarter ranged from $107,500 in the Wichita, Kan., area to $523,500 in the San Francisco-Oakland-Fremont area. The second most expensive condo market reported was Honolulu at $330,000, followed by Los Angeles-Long Beach-Santa Ana at $327,800.
Other affordable condo markets include Greensboro-High Point, N.C., at $109,600 in the second quarter, and the Indianapolis area at $113,500.
Regionally, the median existing single-family home price in the Northeast fell 9.6 percent to $269,000 in the second quarter from the same period in 2007. After Binghamton, the strongest price increase in the Northeast was in Elmira, N.Y., up 6.6 percent from the second quarter of 2007, followed by Buffalo-Niagara Falls, N.Y., with a median price of $108,200, up 4.7 percent.
The median existing single-family home price in the Midwest declined 0.9 percent to $161,500 in the second quarter from the same period in 2007. The strongest metro price increases in the Midwest were in the Decatur, Ill., area, where the median price of $94,200 was 6.0 percent higher than a year ago, and Des Moines, Iowa, at $156,600, also up 6.0 percent, followed by Peoria, Ill., at $124,800, up 3.7 percent from the second quarter of 2007.
In the South, the median existing single-family home price was $177,000 in the second quarter, down 4.1 percent from a year earlier. After Amarillo, the strongest price increase in the South was in the Charleston, W.V., area, at $136,600, up 7.1 percent from a year ago, followed by Corpus Christi, Texas, with a 6.2 percent gain to $144,400, and Greenville, S.C., at $160,300, up 5.1 percent.
