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Prices Holding Up Well Despite Everything

By Robert Freedman, senior editor, REALTOR® Magazine

One of the remarkable things about home sales today is the strength we’re seeing in the national median price. For July it was $182,600, up almost a percentage point from a year ago. That’s about what inflation is right now, according to the Consumer Price Index. When you consider the slowdown in sales volume now that the home buyer tax credit is ended, the resiliency in pricing is a bright spot.

NAR Chief Economist Lawrence Yun at his monthly press conference in Washington yesterday attributed that resiliency to the equilibrium of prices to household income (including mortgage-payment to income) and the drop in new-home construction.

In his analysis, homes are priced at a level that matches closely with households’ ability to pay. Thats’ a reasonable place for prices to be right now, all things considered, and he thinks any big swings up or down are unlikely in the next few months, even if home sales continue to struggle and inventories stay high.

Of course, if inventories stay high well into the fourth quarter, then home prices could once again come under pressure.

So, prices are aligned with the economy and interest rates remain historically low (4.42 percent on average). What’s missing is consumer confidence, and that appears to be dependant in part on evidence that jobs are growing.

Watch Yun’s press conference in the player above.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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Comments
  1. Hi Robert, not intended, I’m sure but don’t you see how the headline of your post is a bit misleading?

    The reason median sales price increased was due to the shift in the mix of sales post-tax credit. There were substantially larger declines at the lower end of the price spectrum moving the midpoint of the market higher. You can see it in your data very clearly here:

    http://www.realtor.org/ro/research/69da234ae73a51cbd882jeca323b8cefdq1f4e/ehs_release_201007.xls

  2. I wish NAR would focus on the current market trends. Yes, it is important to stay positive, however, to ignore the downside of the market does not make it go away. The more distressed homes that sell at low ball prices, the lower all prices will continue to go, period. Not only does employement need to stablize but the buyers want to be sure the home the buy today will not continue to go down in value, and that is far froma realistic view.

  3. Jonathan, you make a good point. NAR Chief Economist Lawrence Yun made it clear that the mix of housing types affects the median home price, and he said the data were showing a larger mix of upper-end homes, possibly because jumbo financing was getting a little easier to get, plus the data were showing a very high share of all-cash buyers. But the reverse is also true. In previous months, when the mix included more distressed sales, the national median price was brought down. That impacted homes even in neighborhoods where prices were holding up well. So, this month we can say higher end homes are skewing the median price up while last month foreclosures were skewing the median price down. What you’re pointing out is the weakness inherent in any national data set that tries to aggregate trends from disparate markets. So, we’re approaching these national numbers with the understanding that you’re going to get these unavoidable changes in the mix, but as long as you use consistency in the way you collect your data, the results are valuable because they show meaningful changes over time. Thanks for making this point part of the conversation.

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