Home prices in metro areas soar Posted 5/22/2005 11:18 PM/Updated 5/23/2005 1:54 AM By Sue Kirchhoff, USA TODAY
WASHINGTON — Home prices keep going up.
A home for sale in San Francisco, one of the country's most expensive real estate markets. By Jeff Chiu, AP
A record number of metro areas showed double-digit appreciation in median existing-home prices from the first quarter of 2004 to the first quarter of 2005, according to the National Association of Realtors. The group's list shows 65 of 136 cities had double-digit price increases; six had modest price declines.
Florida was the most frenzied market, with Bradenton, Sarasota and West Palm Beach-Boca Raton leading the nation in price growth. In line with recent trends, the strongest price gains were on the East and West coasts. Overall, the median existing single-family home price rose 9.7% to $188,800 in the first quarter, from $172,100 in the first quarter of 2004.
David Lereah, chief economist for the NAR says that the price gains were driven in part by tight supplies in some markets, adding that the price situation could improve next year if interest rates rise. But several economists, including members of the Federal Reserve, say the record housing market can't be explained by such factors as a growing economy, tight supply or low interest rates. They're warning that some markets are ripe for a price slowdown or fall.
"I thought the housing market was overdone two years ago, but I think it's through the roof now in many places," says Mark Zandi of Economy.com. "I said it with lots of caveats and I wasn't screaming very loudly, but now I scream loudly. Our clients are very concerned; they're looking carefully."
There is evidence of speculative buying in hot markets. Real estate firm DataQuick Information Systems at the request of USA TODAY analyzed how often buyers are flipping houses — reselling after owning for less than six months.
Flipping now makes up 11.5% of current home sales in Las Vegas, compared with 2.4% five years ago. In red-hot Phoenix, quick resales are 5.2% of sales, from 2.9% five years ago. In Los Angeles, however, such activity has decreased to 4.1% from 4.3%. For the nation as a whole, the flipping figure is 3.7%, compared with 2.4% five years ago, DataQuick says.
While the NAR report covered existing home sales, home builders also see rising sales and prices. They expect the trend to continue, given the difficulty of buying land and clearing zoning hurdles on the coasts.
"Business is just as good as it's ever been. I expect it to moderate over time, but I don't expect it to come crashing down," says Steve Hilton, co-CEO of Scottsdale, Ariz.-based Meritage Homes. "Housing is a basic need; its not necessarily an elective."
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