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A look at the big picture
By Buck Maxey The most recent report from the National Association of REALTORS® (NAR) covering the fourth quarter of 2006 makes some interesting points regarding the overall condition of the real estate market. Although there are no real surprises, it is interesting to note that, once again, overall prices at year-end were higher than at the end of 2005. Total existing homes sales, including single-family and condo sales, were at a seasonally adjusted annual sales rate of 6.24 million in the fourth quarter, which was down 10.1% from 6.94 million unit level in the same quarter from 2005, although six states did show increases in sales. In the fourth quarter, analysis for metro-area single-family home prices in 149 MSAs show 71 gained in price over the previous year (including 14 with double-digit gains), 73 decreased in price, and 5 were unchanged. David Lareah, Chief Economist for the NAR, contends that the fourth quarter of 2006 may have been the bottom of the current cycle. "This information confirms 2006 was the year of contraction, and hopefully the fourth quarter was the bottom of this current business cycle. Home sales are leveling at historically high levels, and examination of data within the quarter shows home prices stabilizing towards the end. When we get the figures for this spring, I expect to see a discernable improvement in both sales and prices." Somewhat surprising is the fact that, in spite of widespread price declines, the median single-family home price actually rose 1.4% for the year to $222,000. Although in the fourth quarter, it was down to $219,300 -- a 2.7% decrease from the same quarter in 2005. The report also points out that, even in areas with recent price declines, homeowners across the nation have seen substantial increases in their home's value over the last five years. NAR President Pat Vredevoogd-Combs feels a broader view is required, stating that "since the typical homeowner stays in a home six years, it's more useful to look at the five-year comparison for metro home prices-most of them are seeing strong gains." In fact, nationally, the median five-year price gain is 41.8%. When broken down by region, you can see that the overall trend for the fourth quarter was a reduction in sales and median prices from where they were the previous year: Existing Single-Family Home Unit Sales/Median Price Northeast - 1.04 million units in Q4, 6.6% below one year ago
- Median price $274,600, 2.5% below previous year
South - 2.49 million units in Q4, 8.5% below one year ago
- Median price $181,700, 3.7% below previous year
Midwest - 1.43 million units in Q4, 8.6% below one year ago
- Median price $161,800, 4.2% below previous year
West - 1.28 million units in Q4, 17.8% below one year ago
- Median price $355,100, 0.4% above previous year
| Initial indications are that early 2007 activity is picking up as sellers become more flexible on pricing and buyers are moving back into the markets. In fact, seasonally adjusted single-family sales in February actually increased 3.7% over January; however this was still a decrease of 3.4% from February 2006. In addition, the median existing single-family home price dropped 1.5% from a year ago to $211,100. What's important to take away from this report is that a lot of the negative hype about the market is based on localized conditions, rather than on the market as a whole. . . . Buck Maxey is HVA's market research analyst, as well as a Licensed REALTOR® and Licensed Loan Officer. He can be reached at 972.761.0046, ext. 173.
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