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Homeownership is Movin’ on Up

Homeownership is Movin’ on Up

Rising prices, shortages of entry level homes and a lackluster economy are combining forces to change the face of homeownership.  The result is a sea change in the median prices of home purchases and a growing gap in the financial profiles of those who can afford to own a home and those who will live their lives as renters.  These changes today are taking place fastest not in the traditional hot markets but in states like Ohio, New York and Michigan.

RealtyTrac reported last week that sales prices in every price range above $200,000 increased as a share of total sales, both from the previous month and from a year ago, with the increase generally higher in the higher price ranges (see table below).

The share of home sales in the $200,000 to $300,000 price range increased 2 percent from the previous month and were up 6 percent from a year ago, but the share of home sales in all price ranges above $750,000 was up more than 20 percent from a year ago.

Meanwhile the share of home sales decreased from a year ago in all price ranges below $200,000, with bigger decreases corresponding to lower price ranges. The share of homes priced between $100,000 and $200,000 decreased 5 percent from a year ago, while the share of homes between $50,000 and $100,000 decreased 13 percent and the share of homes priced below $50,000 — often highly distressed homes — decreased 22 percent.

Home sales in the $100,000 to $200,000 price range accounted for one-third of all home sales in May — the largest percentage of any price range — but homes priced between $200,000 and $400,000 were close, accounting for nearly 32 percent of all sales for the month. Sales of homes priced in the $200,000 to $400,000 range were at their highest percentage of U.S. home sales since September 2008 — a 68-month high.

Markets with highest annual home price appreciation

Surprisingly the areas where homeownership is movin’ on up  the fastest today are not the coasts or the sand states, where prices are generally higher and more volatiles states in the Northeast, Midwest and South. The greatest rises in Median home prices in May compared to a year ago were in New York (up 28 percent), Ohio (up 19 percent), Michigan (up 18 percent), Illinois (up 17 percent), and Georgia (up 16 percent).

Likewise, fastest appreciating markets in May were places where prices increases have been slow in the past::

Cleveland: median home prices up 18 percent from year ago compared to 1 percent annual home price appreciation in May 2013. Second consecutive month with double-digit increase in home prices.

Dayton, Ohio: median home prices up 18 percent from year ago compared to 1 percent annual home price decrease in May 2013. Fourth consecutive month with double-digit increase in home prices.

Akron, Ohio: median home prices up 16 percent from year ago compared to 4 percent annual home price appreciation in May 2013. Third consecutive month with double-digit increase in home prices.

Columbus, Ohio: median home prices up 13 percent from year ago compared to 3 percent annual home price decrease in May 2013. Fourth consecutive month with double-digit increase in home prices.

Austin, Texas: median prices up 11 percent from year ago compared to 7 percent annual home price appreciation in May 2013. Eight out of last nine months with double-digit increase in home prices.

Augusta, Ga.: median home prices up 11 percent from year ago compared to 4 percent annual home price decrease in May 2013.

“Housing demand across Ohio is currently outpacing supply in many metro areas. As demand remains healthy, we are seeing home prices rise in many areas year over year, creating a return of equity and enabling homeowners to now consider placing their homes on the market to take advantage of low interest rates,” said Michael Mahon, executive vice president/broker at HER Realtors, covering the Columbus, Cincinnati and Dayton, Ohio markets.

Cooling markets 

In markets that have already experienced accelerated appreciation in 2013, conditions are cooler this spring.

Phoenix: median home prices up 6 percent from year ago compared to 28 percent annual home price appreciation in May 2013. Smallest annual increase in home prices since February 2012.

Las Vegas: median home prices up 15 percent from year ago compared to 24 percent annual home price appreciation in May 2013. Smallest annual increase in home prices since August 2012.

Los Angeles: median home prices up 11 percent from year ago compared to 27 percent annual home price appreciation in May 2013. Smallest increase since November 2012.

Denver: median home prices up 7 percent from year ago compared to 14 percent annual home price appreciation in May 2013. Smallest increase since April 2012.

Tampa: median home prices up 5 percent from year ago compared to 23 percent annual home price appreciation in May 2013.

Consequences of unattainable homeownership

Should the real estate economy make homeownership permanently beyond the reach of a large part of the population, important policy changes could follow, as outlined in a report called Rise of the Renter Nation by Homes for All Campaign of the Right to the City Alliance,

“Current housing policy remains biased toward a homeownership model, neglects renters, and continues to place its faith in the very same market mechanisms and actors that precipitated the housing crash in the first place… The converse of the housing market collapse is an unprecedented rise in the number of renter households, one that shows few signs of slacking over the next decade. 2012 saw the addition of 1.1 million renters, the second year of 1 million–plus growth,5 adding to the total of over 5 million new renters that entered the rental market between 2005 and 2012. Over this period, renters have accounted for all net household growth. Over the next decade, this trend is likely to continue,” the report said.

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