NAR's Second-Quarter Survey Shows Home buyers Responding to Lower Metro Prices

WASHINGTON, DC (August 14, 2008) – Existing-home sales rose from the first quarter in 13 states, largely from buyers responding to discounted home prices, according to the latest quarterly survey by the National Association of Realtors.

Nearly one-quarter of metropolitan areas showed rising home prices in the second quarter from a year ago, with greatly mixed conditions continuing around the country.

Lawrence Yun, (top right photo) NAR chief economist, said a clear cause-and-effect response has developed in the housing market. “The biggest home-sales gains over the previous quarter have been in some of the markets with the steepest and fastest price drops,” Yun said.

Compared with the first quarter, existing-home sales increased 25.8 percent in California, 25.0 percent in Nevada, 20.5 percent in Arizona and 10.1 percent in Florida. “Buyers in these areas are responding to deeply discounted home prices.”

In the second quarter, 35 out of 150 metropolitan statistical areas 1 showed gains in median existing single-family home prices from the second quarter of last year, while 115 had price declines. NAR’s track of metro area home prices dates back to 1979.

NAR President Richard Gaylord, (middle left photo) a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said foreclosures are distorting the price data.

“In many areas with large concentrations of foreclosure sales, homes are being purchased below replacement cost values,” Gaylord said. “Many buyers with long-term expectations are getting exceptional value in the current market.

"Once the inventory is drawn down, price pressure will return because the costs of construction are rising – today’s buyers are very well positioned to build wealth over time.”

A separate recent study by the National Bureau of Economic Research, “Housing Supply and Housing Bubbles,” shows construction costs in 2007 were higher than home prices in 33 out of 79 metro areas studied.

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage rose to 6.09 percent in the second quarter from 5.88 percent in the first quarter; the rate was 6.37 percent in the second quarter of 2007.

For a complete copy of NAR's release, please contact Walter Molony, NAR Public Affairs, 202/383 1177 wmolony@realtors.org