Inventory increased and metro market prices rose at a slower pace in the fourth quarter of 2018, according to the latest quarterly report by the National Association of Realtors. The national median existing single-family home price in the quarter was $257,600, up 4.0 percent from the fourth quarter of 2017 ($247,800).

Single-family home prices increased in 92 percent of measured markets last quarter, with 163 out of 178 metropolitan statistical areas (MSAs) showing sales price gains in the fourth quarter compared to a year ago. Fourteen metro areas (8 percent) experienced double-digit increases, down from 18 in the third quarter.

Lawrence Yun, NAR chief economist, says in light of the various hurdles for 2018, the close of the fourth quarter was promising. "Home prices continued to rise in the vast majority of markets but with inventory steadily increasing, home prices are, on average, rising at a slower and healthier pace," he said.

Total existing-home sales, including single family homes and condos, decreased 1.8 percent to a seasonally adjusted annual rate of 5.180 million in the fourth quarter, down from 5.273 million in the third quarter. That number is 7.4 percent lower than the 5.593 million-pace during the fourth quarter of 2017.

Yun said the West Coast needs more homes built. "The West region, where home prices have nearly doubled in six years, is undergoing the biggest shift with the slowest price gain and large buyer pullback."

At the end of the fourth quarter, there were 1.55 million existing homes available for sale, 6.2 percent above the 1.46 million homes for sale at the end of the fourth quarter in 2017. The average supply during the fourth quarter was 4.0 months – up from 3.5 months in the fourth quarter of 2017.

National family median income rose to $77,392 in the fourth quarter, while overall affordability decreased from a year ago due to higher mortgage rates and home prices. To purchase a single-family home at the national median price, a buyer making a 5 percent down payment would need an income of $62,954, while a 10 percent down payment would require an income of $59,640, and $53,013 would be necessary for a 20 percent down payment. 

The five most expensive housing markets in the fourth quarter were the San Jose-Sunnyvale-Santa Clara, California metro area, where the median existing single-family price was $1,250,000; San Francisco-Oakland-Hayward, California, $952,400; Urban Honolulu, $812,900; Anaheim-Santa Ana-Irvine, California, $799,000; and San Diego-Carlsbad, $626,000.  

The five lowest-cost metro areas in the fourth quarter were Decatur, Illinois, $89,300; Youngstown-Warren-Boardman, Ohio, $97,200; Cumberland, Maryland, $109,100; Elmira, New York, $111,400; and Erie, Pennsylvania, $113,300.

Metro area condominium and cooperative prices – covering changes in 61 metro areas – showed the national median existing-condo price was $237,900 in the fourth quarter, up 0.3 percent from the fourth quarter of 2017 ($237,100). Seventy-five percent of metro areas showed gains in median condo prices from a year ago.

"Housing affordability will be the key to sustained healthy growth in the housing market in the upcoming years. That requires more homebuilding of moderately priced homes," Yun said. "Housing starts fell far short of historically normal levels, with only 9.6 million new housing units added in the past decade; compared to 15 to 16 million that would have been needed to meet our growing population and 20 million new job additions.

"Local zoning law changes, expanding construction worker training programs at trade schools and promoting the use of tax breaks for developers in the designated Opportunity Zones will all play an important role in assuring an adequate future supply of housing," Yun said. 

Regional Breakdown

Total existing-home sales in the Northeast sat at an annual rate of 707,000 (up 3.9 percent from last quarter) and are down 5.4 percent from a year ago. The median existing single-family home price in the Northeast was $286,000 in the fourth quarter, up 6.5 percent from a year ago.

In the Midwest, existing-home sales fell 0.3 percent in the fourth quarter and are 5.9 percent below a year ago. The median existing single-family home price in the Midwest set at $196,900, a 1.6 percent increase from the fourth quarter of 2017.

Existing-home sales in the South declined 2 percent in the fourth quarter and were 5.4 percent lower than the fourth quarter of 2017. The median existing single-family home price in the South was $228,200 in the fourth quarter, 3.3 percent above a year ago.

In the West, existing-home sales in the fourth quarter decreased by 6.5 percent and are 13.9 percent below a year ago. The median existing single-family home price in the West increased 1.8 percent year over year to $383,100.