Home prices climbed and sales declined during the third quarter as a chronic supply shortage continued to disrupt the housing market.
Single-family home prices rose on an annual basis in 92% of 177 U.S. metropolitan areas, according to the third quarter report from the National Association of Realtors. That was the largest share of metros notching price gains in more than two years.
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The gains are being driven mainly by a lack of inventory of homes for sale, which is also helping to depress sales activity. Existing-home sales slipped 3.1% to a seasonally adjusted annual rate of 5.39 million in the third quarter from the second quarter and are just 0.2% higher than the same period a year earlier, according to the report.
Rising incomes, strong consumer confidence and the progression of the millennial generation into homeownership are helping drive demand for housing. But housing supply is continuing to contract, especially in areas with the strongest economic growth, tipping the market out of balance.
Normally such broad-based strength in housing markets across the country would be considered good news. "In this current housing shortage environment, it is not good news. It is hindering affordability," said Lawrence Yun, chief economist at the National Association of Realtors.
At the end of the third quarter, there were 1.9 million homes for sale, 6.4% less than the same period last year. The average supply during the second quarter was 4.2 months, down from 4.6 months a year earlier.
There is some indication that the most extreme price gains are beginning to slow. In the third quarter, 19 metro areas experienced double-digit price increases, down from 23 in the second quarter.
Nonetheless, more metro areas posted price gains in the third quarter than in the second, when price gains were reported in 87% of metro areas.
The most expensive metropolitan areas in the U.S. remained concentrated in California. The median price of a previously built single-family home in San Jose was $1.165 million, while San Francisco's median price was $900,000 and the Anaheim-Santa Ana metro area posted a median of $790,000.
The median price in the Western region of the U.S. increased 7% to $373,700 in the third quarter compared with a year earlier. Prices climbed 4.1% in the Northeast, 5.6% in the Midwest and 5.5% in the South.
The California Association of Realtors reported separately on Thursday that 28% of California households could afford to purchase a home at the median price of $555,680 in the third quarter, down from 29% in second-quarter 2017 and 31% in the third quarter of 2016.
"California is at a critical point where because of the housing situation companies may decide to expand elsewhere," Mr. Yun said.
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(END) Dow Jones Newswires
November 02, 2017 12:34 ET (16:34 GMT)