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Home prices accelerate in numerous U.S. metros

Home prices rose at an eye-popping rate in the Silicon Valley and numerous cities in the United States in the first quarter, the National Association of Realtors (NAR) reported on Monday.

pricehotRealtors said 53 metropolitan areas, or 30 percent, of the 178 cities it tracks recorded double-digit year-over-year gains in the median sales price. In the fourth quarter, just 15 percent of all cities saw an annual price gain of 10 percent or more.

Home prices were up on an annual basis in 90 percent of the metros.

“It is obvious that prices, in some of these markets, have accelerated,” said George Ratiu, NAR’s managing director for housing and commercial research, during a telephone interview.

San Jose, California, again took the top spot as the nation’s most expensive housing market. The median sales price there topped $1.3 million, and prices rose 28 percent year over year as of the first quarter, NAR reported. Other pricey markets with significant annual gains included Seattle (up 15 percent); San Francisco (up 12.5 percent); and Los Angeles (up 12.3 percent).

The upward march of prices wasn’t confined to the usual suspects on the coasts, however. The fast-growing cities of Boise, Idaho; and Durham, North Carolina, posted annual home-price gains of 18.5 percent and 17 percent, respectively. Reno, Nevada, saw home prices rise by 17 percent; and Las Vegas, one of the cities that suffered most during the housing crash, saw an annual price gain of 12 percent. Prices also have moved up by double digits in several Central Florida cities.

Nationally, the median home price was $245,500, up 5.7 percent from the first quarter of 2017, NAR said. The trade group estimated that to buy a home at the median price with a 5 percent downpayment, you’d need an income of $55,732.

The steep rise in certain cities is a bit surprising. Most analysts forecast that home prices would cool off somewhat this year, in part because of the tax overhaul law that minimized certain tax incentives for homeownership.  

“We assumed in some of the high-cost states that the tax act will dull some of the demand for housing and then, in addition, with interest rates rising, we expected that [home prices] would moderate,” Ratiu said. He said that many people, however, particularly those who held onto their jobs and didn't take significant hits to their stock and savings portfolios during the recession, are in a great position now to pay higher prices for homes.

“You think of people who bought their house before the prior boom, their equity in their home is significant,” Ratiu said. “For those folks, obviously the capacity to pay for something more expensive is very much there.”

Ratiu said the recent surge in certain metros has been driven by ultra-tight for-sale inventories and heavy consumer demand. Many of these cities are tech centers with an abundance of high-paying jobs. Prices are rising fast in several cities that are already expensive, however, and that is squeezing people making the median wage for that area, he said.

“I wouldn’t say that any of these places are necessarily in the red zone [for a bubble],” Ratiu said. “I would say, however, that affordability is a major concern, frankly.” 


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