NEW YORK (CNN/Money) - U.S. residential real estate markets lost no steam in the first quarter of 2005, according to statistics released Thursday by the National Association of Realtors.
The NAR's quarterly report covers 136 metro areas (see how they all rank). A record 66 of these have experienced double-digit jumps in home prices over the past year.
The previous record was 62 in the last quarter of 2004. Only six areas showed a fall in prices and those declines were fairly modest.
The median price of a single-family American home hit $188,800 at the end of the first quarter, a rise of 9.7 percent compared with a year ago.
The NAR, the nation's biggest real estate agent group, pointed to tight inventories as a major factor in the continued strong growth.
"We simply don't have enough homes on the market to meet demand," said David Lereah, the NAR's chief economist, in a statement. "We think the supply situation may improve next year when interest rates are expected to be higher – that should result in a lessening of demand and cooler price appreciation."
Three Florida metropolitan areas led the charge; home prices in Bradenton jumped 45.6 percent from a year earlier to $275,100. Sarasota was up 36 percent to $326,300 and the West Palm-Boca Raton area rose 35.9 percent to $362,800.
Beaumont, Tex. led the list of six declining metro areas with a loss of 6.5 percent to $90,000. Other losers included Canton, Ohio (down 4.5 percent to $103,400), Syracuse, N.Y. (down 2.6 percent to $92,600), and Waterloo-Cedar Falls Iowa (down 2.6 percent to $86,500).
Prices ranged from a low of $82,400 in the Youngstown-Warren area in Ohio, to more than eight times that in the San Francisco Bay area where the median price was $689,200. Anaheim-Santa Ana (Orange County, Calif.) was the second most expensive metro area at $656,900 and San Diego was third at $584,100.
Regionally, the West showed the fastest growth at 16.9 percent. In the Northeast, prices rose 14.0 percent. The Midwest had increases of 7.8 percent and the South had a 6.6 percent price rise.
The median house price was highest in the West, at $282,900, and lowest in the Midwest at $148,800.
Separately, U.S. antitrust regulators are preparing to sue the National Association of Realtors over policies they believe will illegally restrict commission discounting and harm online competitors, The Wall Street Journal reported Monday, citing lawyers close to the case. See more.
The Phoenix-area real estate agent's clients include a couple who made a $150,000 profit by reselling a house they held for just six months, an investor who paid more than $300,000 for a home he plans to put back on the market by year's end, and buyers facing months-long waiting lists at area home builders — if they can even get on a list. (Related graphic: Housing prices increase across the USA)
"The market here is just absolutely nuts," says Harness at West USA Realty in Chandler, Ariz. "I get investors calling; they want to buy a home. I tell them they're a day late and a dollar short at this point."
This was supposed to be the year the housing sector, which has expanded at a record-setting pace since 1998 (except in 2000), started to cool. Instead, existing-home prices rose in March at the fastest pace in two decades, and new-home sales hit another peak in the first three months of the year.
The strong housing sector has buoyed the economy and local governments, through construction payrolls, increased property tax revenue and consumer spending tied to high home equity.
But it also has economic downsides. High prices are keeping buyers out of the market, making it harder for firms to attract workers in pricey markets and breeding high consumer debt and speculative buying.
Many economists warn a major swath of the market is at risk of a price correction.
"Home buyers appear to be irrationally exuberant," Jan Hatzius, economist at Goldman Sachs, said in an April report to clients, recalling Federal Reserve Chairman Alan Greenspan's comment about stock market investors in the 1990s. Hatzius identified frenzied coastal markets, such as Los Angeles, New York, Boston, Washington, Miami and San Francisco, as especially hot.
Prices double in California
Nationally, home prices have jumped an average 50% in the past five years, doubling in California and rising about 80% in Nevada and Hawaii, according to the Office of Federal Housing Enterprise Oversight (OFHEO).
In an April USA TODAY poll of 55 top economists, three-fourths called housing overheated, though they differed on whether they expect a gradual cool-down or a sharp drop in sales and prices. Forecasts for a soft landing expect robust job creation to offset the negative effects of the Federal Reserve's interest-rate increases.
Those forecasts were buoyed Friday, when the government's April jobs report showed stronger-than-expected job creation. But other recent data show a somewhat softer economy than forecast, with wages lagging behind inflation.
A few economists warn of a national housing bubble, but most say local housing and job markets vary so much that a countrywide downturn is unlikely. But price reductions in big urban markets could have a broad effect on the economy. That is why there is plenty of concern about signs of speculative buying: the fact that prices are rising faster than rents, when the two usually move more closely in tandem, and price inflation that can't be justified by low rates or supply.
For their part, industry officials are irritated by "sky is falling" predictions. Home builders say the current, elevated level of about 2 million housing starts a year is not enough to meet higher-than-predicted household growth, fueled by immigration. Supply is tight in some areas because it can now take years to get developments approved by zoning authorities.
Further, affluent baby boomers, rather than selling homes as they near retirement, are buying second houses. Investment homes were nearly a quarter of all purchases in 2004, and vacation homes were an additional 13%, says the National Association of Realtors (NAR).
Joel Rassman, chief financial officer of luxury home builder Toll Bros., a publicly traded firm based in Pennsylvania, reviews the finances of recent customers every few months to gauge how well the company could weather altered economic conditions, such as an interest-rate surge. At last check, his average buyer could pay at least 38% more.
"I still have so many people overqualified, I should be able to sell houses as long as I've got housing in the right location," Rassman says.
Nationally, an NAR survey shows affordability still in a healthy range. But in a number of cities, soaring prices are pushing not just lower-income workers but middle-class families to the sidelines.
In California, on average, only 18% of the population could afford a median-priced home in March, according to the California Association of Realtors.
That's down 3 percentage points from a year ago. The minimum household income needed for a median-priced home, at $495,400, was $115,910 based on a 5.81% interest rate and 20% down.
In Montgomery County, Md., a suburb of Washington, officials say people making the county median income of $84,446 could still afford median-priced existing town houses and condos but won't be able to in a couple of years if current trends continue. New town houses and existing homes are out of reach.
In Minneapolis, where appreciation is more modest, the non-profit Family Housing Fund says lower-paid employees such as cashiers and child care workers can't afford a typical $189,000 home.
At the International Brotherhood of Electrical Workers Local 1245 in Walnut Creek, Calif., about 30 miles northeast of San Francisco, housing is on the agenda in coming contract talks. Union officials will press for higher pay in cities with stratospheric prices, such as San Francisco. The plan is controversial with union members who have opposed wage differences based on geography, gender or other factors.
IBEW Communications Director Eric Wolfe says there is no choice because high prices are distorting the local economy. Fewer workers want jobs in expensive cities. Experienced workers with seniority rights are claiming openings in cheaper rural locations. Mass migration from pricey areas to affordable ones, dubbed the "salmon run," creates its own problems.
"Like the plague in the Middle Ages, real-estate-price inflation is being spread by the people who are fleeing it," Wolfe wrote recently about the bargaining stance
Full Article: http://www.usatoday.com/money/perfi/housing/2005-05-10-housing-cover_x.htm
May 13 — How much home you'll get for your money depends entirely on where you live. Consumer Watch took a look at how the Central Valley's housing market stacks up with the rest.
A bubbling creek running right through the backyard, a
large swimming pool, a brand new, state of the art kitchen — all things Nancie
and John Vautier of Sanger never dreamed of.
"No, I never never thought I could afford anything like this," says Nancie.
"We sit in the backyard now and we just grin at each other and say I just love
it out here, it's just wonderful."
It's wonderful because when they sold their small home in the Bay Area to
move to Sanger, they made a $330,000 profit.
"When I got the money in escrow from my old home, we came down and looked and
saw this the first weekend and got it that weekend," says John.
They're very typical of a new type of Central Valley resident — equity
refugees. Buyers who often pay cash for their home in the Valley after making a
handsome profit elsewhere.
Oftentimes, they are out-of-town investors just looking for a bargain.
While that means Fresno prices are rising quickly, they're still considered a
steal compared to the rest of the state.
According to the California Association of Realtors, the average home price
in the Fresno area is now $314,000.
Los Angeles home prices are at an average of about $473,000 and the average
home costs $678,000 in San Francisco.
While the numbers are astounding, it's even clearer with an actual
side-by-side home comparison.
Here is what you can get for $500,000 in North Fresno: 4 bedrooms, 3 bath,
over 2,500 square feet, with a pool.
Compare that to a much more modest $500,000 home in the East Bay Area: a 3
bedrooms, 2 bath, 1,100 square feet fixer upper.
Here is what you can get for $1 million in North Fresno that looks like a
mansion: 5 bedrooms, 4 baths, over 4,500 square feet, with a pool.
A $1 million home in the East Bay Area is nice, but hardly a mansion: 4
bedroom, 2 baths, 2,500 square feet and a pool.
California is home to 7 of the nation's 10 least affordable housing markets.
Comparing, for example, what a million gets you in Morristown, New Jersey,
Toledo, Ohio and Raleigh, North Carolina, you get significantly more bang for
your buck.
Even the Central Valley has stopped being affordable to a lot of people. Full Article: http://abclocal.go.com/kfsn/features/consumerwatch/print_consumer_051305_home_comparison.html
The 1,000-unit Hilltop Bayview Apartments has sold for $114.5 million,
according to Marcus
& Millichap Real Estate Investment Brokerage Co., which handled the
deal. The apartments were sold to Pennsylvania-based private real estate investment
company GMH
Associates Inc. The sales price equals about $113,600 per unit and the transaction was the
largest based on number of units in the Bay Area since July 1999, according to a
statement from Marcus & Millichap. The new owner plans to invest about $8
million in the property to reposition it in the Class A rental market.
Full Article: http://eastbay.bizjournals.com/eastbay/stories/2005/05/09/daily43.html?t=printable
