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46 METRO AREAS SEE HOME PRICE GROWTH; SOME FACE AFFORDABILITY ISSUES e National Association of Realtors (NAR) released its latest quarterly report, highlighting upward trends in existing-home prices. An additional annual affordability report showed less favorable conditions for home affordability. e report revealed an increase in exist- ing single-family home prices in 73 percent of measured markets, citing 119 of 164 metropolitan areas showing gains based on closings in the fourth quarter. While still a positive trend in pricing, there were fewer price increases than in the third quarter, with an 88 percent increase from a year earlier. Lawrence Yun, NAR chief economist, said there are two ways of looking at the price gains. "e vast majority of homeowners have seen sig- nificant gains in equity over the past two years, which is helping the economy through increased consumer spending," he said. "At the same time, home prices have been rising faster than incomes, while mortgage interest rates are above the record lows of a year ago. is is beginning to hamper housing affordability." e national median existing single-family home price was $196,900 in the fourth quarter, up 10.1 percent from $178,900 in the fourth quarter of 2012. In the third quarter, the median price rose 12.5 percent from a year earlier. Yun notes a tight supply of existing homes and a decrease in production of new homes are two driving factors in the elevated prices. "New home construction activity needs to increase significantly in the fast-appreciating markets to help relieve upward price pres- sure," Yun said. In 2013, housing starts totaled 924,000, well below the historic average of 1.5 million units. Yun continued: "Added housing supply will help moderate price growth this year and should help to stem erosion in affordability, but mort- gage interest rates are projected to rise above 5 percent by the end of the year." Steve Brown, NAR president and co-owner of Irongate, Inc., Realtors, cautioned consumers to keep in mind that all real estate is local. "e national figures provide useful background, but it really gets down to supply and demand in a given neighborhood," he said. "Metropolitan- area figures are an excellent gauge of local hous- ing markets, but there can be widely ranging conditions within a metro area." e NAR also released its Housing Affordability Index (HAI). e index reported a decrease in affordability, noting a score of 175.8 in 2013 from a record high 196.5 in 2012. An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median- priced existing single-family home, assuming a 20 percent down payment and 25 percent of gross income devoted to mortgage principal and interest payments. In each of the four regions listed in the HAI, total existing home sales declined. Particularly notable was the West Region, where existing-home sales dropped 12.7 percent in the fourth quarter and are 8.1 percent below a year ago. Due to the decline of available homes, the median existing single-family home price in the West jumped 15.5 percent to $286,200 in the fourth quarter from the fourth quarter of 2012. NAHB Leading Market Index Edges Higher in February e National Association of Home Builders (NAHB) released new figures from its Leading Markets Index (LMI), revealing 58 out of approximately 350 metro areas have either returned to or exceeded their last nor- mal levels of economic and housing activity. "Normal levels of economic and housing activity" are defined by the index as a calcula- tion of single-family permits and home prices from 2000–2003 and employment statistics from 2007. e current numbers are averaged and compared to the average of normal levels; an index above 1 indicates a market has re- turned or exceeded its previous normal levels of economic activity. "Housing markets across the nation are continuing their slow and steady climb back to normal levels," said NAHB chairman Rick Judson. "As employment and consumer confidence slowly improves, this is spurring pent-up demand among potential buyers." Major metropolitan areas experiencing a bump include Baton Rouge, Louisiana. e city tops the list of major metros, with a score of 1.41—representing a 41 percent increase from its last normal market level. Other metros with positive index scores include Honolulu, Oklahoma City, and Houston. Smaller metros also experienced a rise in economic and housing activity. Both Odessa and Midland, Texas, boast LMI scores of 2 or better, denoting a doubling of their strength prior to the recession. "Firming home prices are hastening the return of normal economic and housing activ- ity in an increasing number of markets," said David Crowe, NAHB chief economist. "e healthiest markets continue to be centered in smaller metros that boast strong local economies, particularly in the oil-and-gas- producing states of Texas, North Dakota, Louisiana, and Wyoming." e index's nationwide score registered at 0.87, meaning economic and housing activity is running at 87 percent of normal levels. Level of home prices in Q4 2013 Source: S&P/Case-Shiller Home Price Indices STAT INSIGHT 150.39

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