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NAR: End of 2012 Sees Gains in Prices, Sales, Affordability

At the end of 2012, the national median price saw the biggest annual gain in seven years, more metros reported price improvements, and housing affordability managed to finish the year at a record level despite rising values, the ""National Association of Realtors"":http://www.realtor.org (NAR) reported Monday.

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In Q4 2012, median prices for existing single-family homes increased in 133 out of 152 metro areas compared to the same quarter in 2011. In Q4 2011, only 29 metros showed year-over-year improvement, and in Q3 2012, 120 metro areas posted yearly gains.

The NAR also found the national median price for an existing single-family home rose to $178,900 in Q4, up 10 percent from the fourth quarter of 2011. The increase marks the biggest year-over-year gain since the fourth quarter of 2005, when the median price was up 13.6 percent.

According to the NAR, the depleting share of lower-priced homes is contributing to price growth as distressed sales--foreclosures and short sales--diminish. In Q4, distressed sales accounted for 23 percent sales, down from 30 percent a year ago.

Existing-home sales improved as well in Q4, rising to a seasonally adjusted annual rate of 4.90 million, which represents a 12.1 percent increase from Q4 2011 and a 5 percent gain from Q3.

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While sales strengthened, the supply of existing homes for sale decreased in Q4, with supply at 1.82 million, a 21.6 percent decrease from Q4 2011 when 2.32 million existing-homes were available for sale. Unsold inventory now stands at the lowest level since January 2001, according to the NAR.

Lawrence Yun, NAR chief economist, expects sales to stay on a ""sustained upward trend"" with inventory at the lowest level in 12 years and as mortgage rates hover near record lows.

""Home sales are being fueled by a pent-up demand and job creation, along with still favorable affordability conditions and rents rising at faster rates. Our population has been growing faster than overall housing stock, so supply and demand dynamics are very much at play,"" he explained.

On a regional basis, the West led sales with a 5.9 percent quarterly increase in Q4. The remaining three regions also posted gains in sales: Midwest (+5.6 percent), South (+5 percent), and Northeast (+2.2 percent). The West also posted the biggest year-over-year price gain, 20.1 percent. The Northeast saw the smallest increase at 0.7 percent.

At the same time, the association's House Affordability Index registered a record high of 193.5, up from the ""previous high"":http://www.dsnews.com/articles/nar-housing-affordability-to-reach-record-high-in-2012-2013-01-09 of 186.4 in 2011.

The affordability index assumes a 20 percent downpayment and 25 percent of gross income is devoted to principal and interest payments. A 100 on the index represents the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home.

""The housing affordability index shows that the national median income of families was almost double the income needed to buy a median-priced home in 2012, so most buyers are able to stay well within their means,"" Yun said. ""Even with rising home prices, conditions are expected to stay very favorable with the index averaging 161 in 2013, which would be the third best on record.""

According to NAR data, 145 out of 156 metros set records for housing affordability in 2012. Two of the most affordable metros were in Michigan: Detroit-Warren-Livonia and Lansing-East Lansing, where the index hit 571.1 and 397, respectively.

About Author: Esther Cho

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