The prices of single-family homes in Arizona are historically high. The national median existing single-family home price was $215,900 in the third quarter, up 14.7% from the third quarter of 2004 when the median price was $188,200.
The median is a typical market price where half of the homes sold for more and half sold for less. Ninety-seven metros - two-thirds of the total - experienced increases greater than the U.S. historic average of 6.4%.
The strongest price increase in the nation was in the Phoenix-Mesa-Scottsdale area of Arizona, where the third quarter price of $268,000 rose 55.2% from a year earlier. Next was Orlando, Fla., at $261,300, up 44.8% from the third quarter of 2004. Cape Coral-Fort Meyers, Fla., with a third quarter median price of $277,600, was up 42.5% in the last year.
These historically high home price gains are the simple result of more buyers than sellers in the market. Inventory levels are improving, and housing supply will come close to buyer demand in 2006. In other words, a healthy and more balanced market is expected next year.
Since 1968, home prices generally have risen between 1 and 2 percentage points faster than the overall rate of inflation; the historic average price gain appears high relative to inflation because there was a period of rapid inflation in the U.S. during the 1970s and early 1980s.
Improvements in inventory in most areas should take pressure off of home buyers to make snap decisions, or find themselves in a competitive bidding situation. Sellers will enjoy very healthy gains on the value of their home, but should expect annual increases to be much closer to historic levels going forward. This calmer real estate market will create a more level environment for buyers in weighing options to invest in the American dream of homeownership.
The areas experiencing price declines were lower-priced markets, with one or both of the conditions necessary for price softness - local economic weakness, primarily in jobs, or a large supply of homes for sale in the local area.
Median third-quarter metro area prices ranged from $72,800 in Danville, Ill., to nearly 10 times that amount in the San Francisco-Oakland-Fremont area of California where the median price was $721,900. The second most expensive area in the United States was Anaheim-Santa Ana (Orange Co., Calif.) at $710,700, followed by the Honolulu area and San Diego-Carlsbad-San Marcos, Calif., tied at $615,000.
Regionally, the strongest increase was in the West where the median existing single-family home price rose 18.8% over the last year to $322,000 during the third quarter. After Phoenix-Mesa-Scottsdale, the strongest increase in the West was in the Tucson area where the median price of $242,300 rose 34.7% from a year earlier, followed by Honolulu, up 31.1%, and Eugene-Springfield, Ore., at $208,900, up 25.9% from the third quarter of 2004.
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