NAR expects market
to return to ‘normal’

In total 6.8m units were sold, down 2.1 per cent on the 6.9m sold in the first quarter of 2005. Despite the overall decline, 26 states showed increases in sales activity from a year ago, said NAR.

The biggest increase was in New Mexico, where existing home sales were up 26.2 per cent on a year ago. Louisiana’s sales were 22.9 per cent up, and Montana’s 17.5 per cent up. Six other states recorded double digit sales increases on a year ago, but 21 states and the District of Columbia experienced falls.

’A steady rise in mortgage interest rates has slowed home sales in higher cost areas, yet job growth in some moderately priced markets is boosting sales in other areas’, concluded NAR chief economist David Lereah. ‘The net effect is a modest decline in home sales for the nation as a whole, but sales remain historically strong and are providing a solid underlying base for the overall economy’.

Regionally, the strongest performance was in the south, which reported an increase of 2.3 per cent in existing home sales. After Louisiana, the strongest increases were in Mississippi, up 17.3 per cent, North Carolina, up 17.0 per cent, and in Arkansas and Tennessee which both posted double digit sales increases.

In the mid west, existing home sales were up by 1.1 per cent but in the north east they fell by 2.9 per cent on the year. In the west existing home sales were down by 12.4 per cent. After New Mexico and Montana, the best performance in the region was in Utah where existing home sales were 12.7 per cent up on a year ago.

NAR’s latest price data also shows a somewhat mixed picture. Its first quarter metro area single family home price report, covering changes in 149 metropolitan statistical areas, found 60 areas had experienced double digit levels of annual price increase, but 16 areas had experienced price falls.

The national median existing single family home price was put at £115,800 in the first quarter, up 10.3 per cent from a year ago.

The largest single family home price increase was in the Phoenix-Mesa-Scottsdale area of Arizona, where the first quarter price of £152,200 was 38.4 per cent up from a year ago. Next was Orlando, Florida, at £143,200, up 34.0 per cent and Gainesville, Florida, with a first quarter median price of £111,600, up 31.9 per cent.

Median prices ranged from £27,900 in Danville, Illinois, to 14 times that amount in the San Jose-Sunnyvale-Santa Clara area of California, where the median price was £396,900. The second most expensive area was the San Francisco-Oakland-Fremont area at £382,800.

City condominium and cooperative prices, covering changes in 56 markets, put the national median existing condo price was £119,100, up 5.2 per cent on the year.

In the condo sector, the strongest gains were in the Phoenix-Mesa-Scottsdale area, where the first quarter price of £95,400 was 38.0 per cent up from a year ago. In the Honolulu area, the median condo price of £164,200 was up 34.9 per cent, while Miami-Fort Lauderdale-Miami Beach, at £117,700, was up 31.4 per cent.

'With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices’, said Lereah. ‘By the time we report second quarter data, I expect most areas will be returning to normal rates of price growth in the single digit range. Consumers generally can expect normal price appreciation for the foreseeable future, providing solid returns over time’.

Regionally, the strongest increase in the median existing single family home price was in the west, where the average price of £182,800 was up 12.0 per cent on the year. In the midwest, the first quarter median existing single family home price of £84,400 was up 6.7 per cent while in the north east the average of £151,600 was 6.6 per cent up.

In the south, the median price was £95,500, up 6.6 per cent. After the Orlando and Gainesville areas of Florida, the strongest increase in the south was in Ocala, Florida where prices were up 30.8 per cent on average, and the Virginia Beach-Norfolk-Newport News area of Virginia and North Carolina, where they were up 27.1 per cent.

• A NAR survey of second home owners found that ‘baby boomers’ continued to dominate the market, while a growing number of second homes - more than one in 10 - are owned by minorities. About six in 10 respondents own two or more homes in addition to their primary residence, said NAR.

'Middle aged, middle income households are the driving factor in the second home market, with favourable demographics providing a solid fundamental demand in this sector for the next decade’, said Lereah. ‘Boomers believe in diversifying their assets, and most second home owners see their purchase as being a better investment than stocks. A surprising majority of survey respondents hold multiple properties, and they are interested in purchasing additional homes’.