Lack of supply drives up us property prices

San Jose, California, the most expensive market in Q1 2015 Photo: The_Tahoe_Guy

A lack of supply in the face of rising demand is driving up US house prices at the start of 2015.

The median existing single-family home price increased in 85 per cent of metros measured by the National Association of Realtors during the first three months of 2015. 148 out of 174 metropolitan statistical areas showed gains based on closings compared to the same quarter in 2014. Only 25 areas recorded lower median prices.

51 metro areas in the first quarter (29 per cent) experienced double-digit increases, a sharp increase from the 24 metro areas in the fourth quarter of 2014. 37 metro areas (21 per cent) experienced double-digit increases in the first quarter of 2014.

Lawrence Yun, NAR chief economist, says after moderating to healthier levels of growth at the end of 2014, prices picked up in several metro areas during the first quarter: "Sales activity to start the year was notably higher than a year ago, as steady hiring and low interest rates encouraged more buyers to enter the market.

"However, stronger demand without increasing supply led to faster price growth in many markets."

The national median existing single-family home price in the first quarter was $205,200, up 7.4 per cent from the first quarter of 2014 ($191,100). The median price during the fourth quarter of 2014 increased 5.8 percent from a year earlier.

"Sales could soften slightly in some of these markets seeing sharp price appreciation unless housing supply markedly improves and tempers its unhealthy level of growth," adds Yun.