Home price pressures starting to ease, gains still strong

Most metropolitan areas continued to experience strong price gains during the third quarter, but with slightly fewer areas rising at double-digit rates, according to a news release from the National Association of Realtors.

The association's third-quarter metro area home price report, covering changes in 123 metropolitan statistical areas, shows 29 areas with double-digit annual increases in median existing-home prices and only four areas posting small de-clines. In the second quarter, 35 metro areas experienced double-digit annual price increases.

David Lereah, NAR's chief economist, said the price gains reflect a continuing shortage of homes available for sale in many areas during the third quarter. "The good news now is that the imbalance that existed between buyers and sellers has stabilized in most areas, while in others it has become more of a buyer's market."

National median

The national median existing-home price was $151,200 during the third quarter, up 6 percent from the third quarter of 2000 when the median price was $142,700. "This home price gain re-mains above historic norms, with the median price rising 5.3 percentage points above the estimated rate of inflation, which was only 0.7 percent in the third quarter," Lereah said. The normal price increase is one-to-two percentage points above inflation.

NAR President Martin Edwards Jr. said the rate of price increase is expected to slow. "Given the overall economic slowdown, we're expecting the median existing-home price to rise only 3.4 percent next year. This will take some of the pressure off of markets which have been rising very rapidly combined with the drop in mortgage interest rates, it is creating opportunities for some people who were priced out of the market earlier this year." Mortgage interest rates have fallen to the lowest level since the 1960s.

Midwest resale

In the Midwest, the median resale home price of $134,200 during the third quarter was 4.4 percent higher than the same period in 2000. The strongest increase in the region was in Chicago, with a median price of $211,800, up 13.9 percent in the last year.

The next highest increase was in Lin-coln, Neb., where the median price of $123,600 was 12.7 percent higher than the third quarter of 2000, followed by Springfield, Ill., at $96,700, up 11 percent in the last year; Champaign-Urbana-Rantoul, Ill., with a third-quarter median of $106,600, rose 10.5 percent from a year ago.

The strongest increase, according to the NAR survey, was in the Nassau-Suffolk area of New York, with a median price of $263,300, up 22.6 percent from the third quarter of 2000. Next came the Monmouth-Ocean area of New Jersey at $217,000, up 21.4 percent from the third quarter of 2000. Third was Worcester, Mass., where the third-quarter median price of $163,600 rose 21.3 percent from a year earlier.

Median third-quarter metro resale prices ranged from $83,900 in Buffalo-Niagara Falls to nearly six times that amount in the San Francisco Bay area, where the median price was $474,100. The second most expensive area was Boston at $367,300, followed Anaheim-Santa Ana (Orange County, Calif.), with a third quarter median resale price of $365,400.

Low-cost markets

Other low-cost markets include Sag-inaw-Bay City-Midland, Mich., the second least costly area at $86,700, and Waterloo-Cedar Falls, Iowa, with a third-quarter typical resale home price of $87,000.

Regionally, the strongest increase during the third quarter was in the North-east, where the median resale price of $149,200 rose 6.9 percent from a year earlier.

After Nassau-Suffolk, Monmouth-Ocean and Worcester, the strongest increase in the region was in Providence, with a third quarter median price of $163,800, up 18.3 percent in the last year, followed by Portland, Maine, where the typical resale price of $166,200 rose 15.3 percent from a year ago. Four other metros in the Northeast also showed double-digit annual median price gains in the third quarter.

In the South, the median existing-home price of $140,200 rose 6.7 percent from the third quarter of 2000. The strongest increase in the region was in Ft. Meyers-Cape Coral, Fla., where the median price of $115,900 was 20.1 percent higher than a year earlier.

In Ft. Lauderdale-Hollywood-Pom-pano Beach, the third-quarter median price of $181,500 was up 19.3 percent in the last year, while Daytona Beach, at $101,100, rose 18 percent from a year earlier, and Washington, D.C., with a typical resale price of $221,600, rose 17.4 percent. Six other metro areas in the South experienced double-digit price increases.

The third-quarter median existing-home price in the West was $197,700, up 6.4 percent from a year ago. The highest increase in the region was in Sacra-mento, with a median price of $177,000, up 18.4 percent from the third quarter of 2000.

Riverside-San Bernardino, Calif., at $159,700, was up 14.6 percent from the third quarter of 2000.