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52 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ANALYTICS The LaTesT Prices Flourish, affordability suffers NAR's fourth-quarter numbers paint a mixed picture for the housing market. t he National Associa- tion of Realtors (NAR) released its quarterly reports, highlighting deteriorating conditions for hous- ing affordability as prices keep trending upward. The report revealed an in- crease in existing single-family home prices in 73 percent of measured markets, with 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, when prices increased in 88 percent of markets compared to the year prior. Lawrence Yun, NAR chief econ- omist, says there are two ways of looking at the price gains. "The vast majority of home- owners have seen significant 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. This is beginning to hamper housing affordability." The national median exist- ing single-family home price was $196,900 in the fourth quarter, up 10.1 percent from $178,900 in the The LaTesT fourth quarter of 2012. In the third quarter, the median price rose 12.5 percent from a year earlier. Yun notes that 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 pressure," 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 mortgage 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. "The national figures provide useful background, but it really gets down to supply and demand in a given neighbor- hood," he said. "Metropolitan- area figures are an excellent gauge of local housing markets, but there can be widely ranging conditions within a metro area." NAR also released its Housing Affordability Index (HAI). The index recorded a decrease in afford- ability, 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 pur- chase 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, where existing-home sales dropped 12.7 percent in the fourth quarter and were 8.1 percent below their year-ago level. 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.