Home prices are still seeing double-digit increases in 97 of 149 U.S. markets, according to the National Association of Realtors. But don’t get too excited, for even these numbers may be flaky. Let me explain.
I just finished writing a story about the healthiest housing markets in the U.S. based on the NAR data on second-quarter metropolitan area home prices that came out this morning. As if a 1.5% year-over-year national median price decline weren’t bad enough, I now have some guy telling me that even in places like Salt Lake City, where prices have zoomed up over 20% in the past year, the market may be softer than it feels.
Why? “The mix of home sales is in favor of higher-priced homes,” said Bill Hampel, chief economist for the Credit Union National Association, in a phone conversation this afternoon. “It is the lower-priced homes that are not selling right now, and that raises the median home price.”
The NAR uses median home price for homes that have been sold, where half the homes sold above and half sold below that median. With the significant reduction in subprime lending lately, Hampel believes lower-income buyers simply aren’t showing up. This, he says, explains why existing home sales were below what they were one year ago in all but six states.
Sellers may also be inflating median home prices by stubbornly resisting price cuts. “Those prices are really sticky downwards,” said Hampel. “If they discover that they are going to have to take a significant price cut, they just take it off the market.”
Ah well, it was fun while it lasted.