NEW YORK (CNN/Money) – How high can housing prices go?
If you were one of the nay-sayers who expected the bubble to burst at any time, we hate to burst your, er, bubble.
Housing prices from July through September rose 7.2% from the third quarter of 2002. That lifted the national median price for an existing, single-family home to $161,800 -- the highest median ever, according to the National Association of Realtors. The year before, the median price hovered at $150,900.
"The lean inventory of homes available for sale, against a backdrop of record sales, has been driving home prices for the last two years," NAR Chief Economist David Lereah said. "There are more buyers than sellers."
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| | Market | | Median Price | | Increase | | Monmouth/Ocean, NJ | $273,500 | 26% | | Sacramento, CA | $219,800 | 24.6% | | Providence, RI | $203,300 | 24.1% | | Nassau/Suffolk, NY | $307,200 | 23.9% | | San Diego, CA | $379,200 | 21.5% | | Orange County, CA | $439,400 | 20.3% | | Newark, NJ | $326,200 | 17.2% | | Washington D.C../MD.VA | $259,300 | 17% | | Middlesex/Somerset/Hunterdon, NJ | $296,300 | 16.9% | | Atlantic City, NJ | $149,700 | 16.4% |
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* year-over-year change | Source: NAR |
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Nationally, there was a five-month supply of homes on the market during the third quarter, just short of the "normal" six-month inventory. That means that it would take just five months for all available homes on the market to sell out. To have a balance between sellers and buyers, there must typically be about a six-month supply.
In some regions, inventory appeared to be even tighter. In the Northeast, home prices soared 10.7% from a year ago. In the West, prices rose by 8.6%, followed by the South, where the tab for a home rose by 8.4%. The Midwest saw the most modest increases – just 5.1%.
What's more, as many as 33 metro areas boasted double-digit price increases. Monmouth and Ocean, NJ., grabbed the No. 1 ranking for the nation's hottest housing market. A typical home in this region now costs $273,500, a 26% jump over last year. Across the country, Sacramento, CA homes gained 24.6% to $219,800. Next up, Providence, RI. where homeowners were able to fetch 24.1% more for their homes – about $203,300 -- than they did a year ago.
Beginning to crack?
That said, while year-to-year performances were almost consistently upbeat, prices have slipped in some markets since the second quarter.
The median price for a home in San Francisco, for example, now stands at $530,900. That's a 12 % increase from last year and the most expensive market nationally. Nevertheless, that hefty tab has slipped 2% from the $540,500 median price logged in the second quarter this year.
Seven other markets also saw home prices dip from the second quarter. They include Austin/San Marcos, Texas; Birmingham, Ala.; Boise City, Idaho; Knoxville, Tenn.; New Orleans; Sarasota, Fla.; and Springfield, Mass.
"We don't see a sustained record-setting pace. We see a slowing of price appreciation to more manageable levels next year, in the 5-percent range," Lereah said, adding that Southern California prices should continue to soar in 2003.
"The supply of homes is almost non-existent," he said. "They really have a housing shortage in Southern California."
As for those markets that have slipped. Lereah isn't concerned. "Right now we're not getting families with children buying homes because people are in school. We're getting single people buying, and thus prices are lower. The homes are smaller. It may look like prices may be going down, but they may not be."
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