A lower supply of inventory and fewer distressed sales led to stronger home price gains across the country, the National Association of Realtors (NAR) revealed in a recent report.
On a national level, the median price for existing single-family homes increased 7.6 percent to $186,100 in the third quarter of this year compared to last year. In the third quarter of 2011, the median price was $173,000. NAR says the annual gain is the strongest since the first quarter of 2006 when the median price was up 9.4 percent.
In the second quarter, the median price posted a 7.2 percent yearly increase.
When assessing third quarter price growth in metros areas, NAR found the median price for existing homes improved in 120 out of 149 metro areas since the same quarter a year ago. NARâ€™s findings are based on closings.
Lawrence Yun, NAR chief economist, pointed to lower inventory as a reason for the uptick in prices.
â€œHousing inventories have been gradually trending down from a record set in the summer of 2007,â€ he said. â€œEarlier this year, a broad equilibrium began to develop in most areas between home buyers and sellers, which led to a sustained upturn in home prices.â€
However, while NAR expects normal price growth in 2013, Yun said, â€œthere is a risk of price acceleration if builders are unable to increase supply to meet the needs of our growing population and household formation.â€
A smaller share of distressed home sales also helped boost prices, but NAR says the elevated prices significantly reflect a recovery.
Distressed home sales, which include foreclosures and short sales, represented 23 percent of sales in the second quarter, a drop from 30 percent a year ago.
All-cash home purchases, which are typically made by investors, were also down. In the third quarter, the share of cash purchases stood at 27 percent, down from 29 percent in the second quarter and third quarter of 2011.
Investors accounted for 17 percent of all transactions in the third quarter compared to 19 percent in the second quarter and 20 percent a year ago.
First-time buyers, who compete with investors for lower-priced homes, accounted for 32 percent home sales in the third quarter, down from 34 percent in the second quarter and unchanged from a year ago.
â€œThe modest decline in first-time buyers and investors shows the impact of limited inventory in the lower price ranges from a shrinking share of distressed homes, which are popular with both of these groups,â€ Yun noted.
Total existing-home sales, which also include condos, rose 3.2 percent quarter-over-quarter to a seasonally adjusted annual rate of 4.68 million. Year-over-year, sales rose 10.3 percent.
The third quarter concluded with 2.32 million existing homes available for sale, 20 percent lower than the close of third quarter last year.
Quarter-over-quarter, existing home sales were up in three out of four regions: the South (+5.4 percent), Midwest (+5.2 percent), and Northeast (+1.7).
In the West, sales fell 1.2 percent, which NAR says is the result of limited supplies.