Home price gains continue to increase, but at a much more sustainable rate than previously. Year-over-year home price increases have decelerated after starting the year at 10 percent, to 4-6 percent, where they have been hovering since April. While some people may speculate that this is indicative of a downward trend, the 4-6 percent range is actually right where we want to be. Price increases above 4-6 percent may create the risk of a bubble. Additionally, when home price gains outpace income, affordability is negatively impacted.
National Association of Realtors data released today showed the median existing-home price fell in September to $209,700, down from $219,800 the previous month. Although the median price fell slightly, it is still up 5.6% from 2013. Home prices have now risen on a year-over year basis for 31 consecutive months. The largest price increases occurred in Detroit, Mich. (14.2 percent) and Miami, Fla. (10.5 percent).
Regional median home price changes for September were:
South prices were $180,900, down from August’s $186,700 but 5.1 percent higher year over year.
Midwest prices were $165,100, down from August’s $173,800 but 4.9 percent higher year-over-year.
Northeast prices were $249,800, down from August’s $265,800 but 4.8 percent higher year-over-year.
West prices were $294,200, down from August’s $301,900 but 4 percent higher year-over-year.
If you are in a market that lagged in recovery, you might begin to see home prices gain steadily. On the other hand, markets that accelerated in recovery and saw rapid price gains earlier in the year will likely be the first to see the most slowdown in price gains. Don’t worry! The decelerated pace of price gain is not an indication that the market is at risk, it is an indication that the market is stabilizing.
The real estate industry is no stranger to change. Agents are constantly making adjustments to fit the current market trends. In areas where prices are stabilizing and homes are remaining on the market a little longer, agents need to adjust their listing presentations and techniques to be compatible with the current climate. In the past, we saw massive price gains coupled with low inventory which resulted in sellers naming their price and entertaining multiple offers, even when the price was above market value. Today, the market is more balanced and buyers are enjoying a slightly less competitive playing field.
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In October, 2014, Keller Williams initiated a new five part blog series, Market ahas. The quarterly series is designed to help our associates better serve as their clients’ local economists. The topics covered each quarter are mortgage rates, unemployment, price change, inventory, and GDP. This is the third article in the series for Q3 2014.
Read other articles in the series:
Mortgage Rates Are Down. What Does That Mean For Your Clients? [Q3-2014]
The Unemployment Rate Is Down. What Does that Mean for Your Clients? [Q3-2014]