As housing affordability reached a new 40-year high, property values across the country appear to be stabilizing in the wake of more home sales and a thinning inventory.
During the first quarter this year, the median price of a single-family home increased in 74 of the 146 metropolitan statistical areas monitored by the National Association of Realtors. Meanwhile, 72 metros reported property value declines, while not a single market saw its prices remain unchanged from the previous three-month period.
Analysts at the industry group believe a shortage of low-priced homes could have been responsible for the changes.
"We now have broad shortages of lower priced homes in much of the country, with very tight supply in Western states for homes through the middle price ranges," said NAR chief economist Lawrence Yun. "This is good news for many sellers who wish to list now, or for those waiting for prices to improve."
Prices edge lower
Median prices of these homes only marginally declined on an annual basis at the beginning of this year to $158,100. This marks only a 0.4 percent decline from $158,700 a year earlier. In addition, real estate-owned properties, including foreclosures and short sales, accounted for an estimated 32 percent of all transactions.
The overall housing inventory declined 21.8 percent during the first three months of this year on an annual basis. As a result, there were an estimated 2.37 million existing homes for sale on the market, compared to 3.03 million at the beginning of 2011. The nation's home inventory has consistently declined on a quarter-over-quarter basis since peaking in 2007.
Affordability reached new high
As a result of the changes in home prices, sales and the inventory, a recent report from Fiserv and Case-Shiller indicates that housing affordability is at the highest it has been in nearly four decades. Analysts at both firms anticipate property values to edge slightly lower during the course of 2012, which could result in an even high level of affordability in the future.
Specifically, the relationship between rental rates and housing affordability reached matched the same level it was at in 1998, while the ratio between median household incomes is at the same level seen in 1991. These changes could provide the financial safety and soundness prospective buyers need to finally make the transition to homeownership.