Home Prices Up 7.6% From Year Ago

The Wall Street Journal

By Conor Dougherty

Home prices appreciated in a growing number of cities during the third quarter, the latest evidence that the real estate recovery is gaining momentum and breadth.

The median price for an existing single-family home was $186,000 in the third quarter, up 7.6% from a year earlier and the largest year-over-year growth since 2006, according to a report Wednesday from the National Association of Realtors. More cities saw gains. Single-family home prices rose in 120 of 149 metropolitan areas tracked by the NAR, up from 110 in the second quarter and 39 in the year-ago period.

Many of the sharpest home-price rebounds have been in markets hard hit by the real estate bust. In the Phoenix metropolitan area, for instance, median prices were up 34.9% from a year ago, according to the NAR. Three cities pummeled by the bust—Las Vegas, Miami, and Riverside, Calif.—all were in the top 20 for price gains with year-over-year increases between 12.0% and 12.7%.

Median prices for existing homes measure the midpoint in sales at a given point in time for homes that aren’t newly built. The level of gains can be skewed if the mix of homes being sold shifts from one month to another. Median prices can rise, for instance, when more expensive homes sell in one month compared with the previous month, even if prices for those homes don’t rise.

Still, there is little doubt that the housing market has improved in the past year. There are fewer “distressed” homes for sale—such as foreclosures and bank sales that tend to drag down prices—and that has whittled the inventory of unsold homes. In addition, rising rents and low interest rates have spurred buyers to return to the market.

At the close of the third quarter there were about 2.32 million existing homes for sale, down 20% from the third quarter of 2011. And rates for a 30-year fixed mortgage averaged 3.54% in the third quarter—a rock-bottom level by historical standards—which was down from a still-low 4.31% average a year ago.

All told, low home prices, rising rents and a slowly improving economy have given more Americans the motivation and confidence to become home owners. About 72% of respondents said it was a good time to buy a home, according to a monthly survey Fannie Mae FNMA +1.43% issued Wednesday. While many consumers expect home prices to rise only modestly over the next year, they believe rental rates will continue to climb, further motivating them to buy.