Home Prices in U.S. Cities Keep Climbing in First Quarter

Home prices in major U.S. metropolitan areas increased in the first three months of 2014 compared with the same period a year ago, yet the growth was smaller historically – a sign that homeownership may become more attainable for many Americans if the trend continues, according to a report ​​this week from the National Association of Realtors.

The median price for existing single-family homes increased in 74 percent of U.S. metropolitan areas, while in the first quarter of 2013, year-over-year home prices had increased in 89 percent of metropolitan areas. The largest year-over-year price gain by percentage was 26.8 percent in South Bend-Mishawaka, Indiana, and the largest decline, 18.6 percent, was seen in Cumberland, Maryland-West Virginia. Smaller markets, however, tend to show more volatility because there are fewer transactions, according to Lawrence Yun, NAR’s chief economist.

“The general trend is that markets that are seeing the consistent strong price increases – South Bend tends to be a little volatile – there you have a solid local job-creating environment combined with a shortage of inventory that is really beginning to push up prices,” Yun says.

Metropolitan areas with the largest single-family home price growth by percentage in the first quarter of 2014 compared with the same period of 2013 are depicted in this graph:

Areas where year-over-year home prices have fallen are below:

In the U.S., the median single-family home prices rose 8.6 percent in the first quarter compared with a year ago, and the median home price was $191,600. The most expensive single-family homes were in San Jose, California, where the median price was $808,000. The least expensive homes were in Youngstown, Ohio, where the median price was $64,600.

“The price increases over the past two years have been a double-edged sword. It’s been very good for the owners or recent buyers because they’re immediately getting equity,” Yun says. “But it has not been good news in terms of affordability because affordability is inversely related. That means that for potential buyers, it’s more difficult because it’s pricier.”

The development in home price growth, Yun says, "will be a healthier development if we didn’t have the spikes in prices rising at a double-digit rate of appreciation."