Home prices surge 13.6%

$208,500 is U.S. average for single-family house

Price up 18% in Baltimore

Biggest 2nd-quarter gains in Ariz., Fla. for resales

August 16, 2005|By BLOOMBERG NEWS

WASHINGTON - U.S. home prices surged 13.6 percent in the second quarter, the fastest pace in more than a quarter of a century, as a decline in interest rates fueled record sales.

The median price of an existing single-family home rose to $208,500 from $183,500 a year earlier, the National Association of Realtors reported yesterday. It was biggest jump since a 15.3 percent gain in the third quarter of 1979. Sales of existing houses and condominiums gained 4.6 percent to an annualized pace of 7.22 million units, the highest ever.

"The continuing shortages of housing inventory are driving the price gains," David Lereah, the group's chief economist, said in the report. "There is no evidence of bubbles popping."

During the quarter, the median price of a single-family home rose in 142 cities - including the Baltimore area - and declined in seven, the Realtors group said. In the third quarter of 2003, after mortgage rates tumbled to the lowest level since the 1950s, all the metropolitan areas in the study had price gains for the only time in two decades.

This year, the biggest second-quarter gain was in the metropolitan areas around Phoenix and Mesa, Ariz., where prices increased 47 percent to $243,400. Fort Myers, Fla., was No. 2, rising 45 percent to $266,800, and Palm Bay, Fla., had the third-largest increase, growing 40 percent to $204,000.

Prices of single-family houses in the Baltimore area rose 18 percent to a median of $264,700 in the second quarter. That compared with the metropolitan Washington area, which gained 26 percent to $429,200, the report said. Las Vegas, the fastest-growing area in the first-quarter report, gained 11 percent to a median price of $300,100.

The biggest decline was in Kalamazoo, Mich., where prices fell 3.5 percent to $122,600, followed by Youngstown, Ohio, down 2.7 percent to $82,900, according to the report.

Prices and sales probably will cool next year, the association said in a forecast Aug. 9. Prices of existing homes likely will rise 5.2 percent in 2006, but sales are expected to drop 3.6 percent. Sales currently are "close to a peak," Lereah said in the forecast.

A gauge of U.S. homebuilder optimism fell to 67 this month from 70 in July, the second straight decline, according to a report yesterday by the National Association of Home Builders. That group noted concern about high land costs and a shortage of lots for construction.

The average rate for a 30-year fixed mortgage dropped to 5.72 percent in the second quarter from 5.76 percent in the first quarter, according to Freddie Mac, the No. 2 U.S. mortgage buyer. A year ago, the rate was 6.13 percent.

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