Home prices climbed in 85% of U.S. metropolitan areas in the first quarter as low mortgage rates and the strongest labor market in almost seven years spurred demand.
The median price of an existing single-family home rose from a year earlier in 148 of the 174 areas measured, the National Association of Realtors said in a report Monday. Fifty-one areas had price gains of 10% or more, compared with 24 regions in the fourth quarter. Prices declined in 25 areas.
The housing market is benefiting as employment returns to precrisis levels. Contracts to buy homes rose in March to the highest level for the month since 2005, according to the Realtors group. The unemployment rate was 5.5% in February and March, a level the Federal Reserve defines as full employment, meaning anyone who wants a job has one. The rate dropped to 5.4% in April.
"We finally have much better job growth, and from that we are seeing the beginning of a recovery in the entry level of the housing market," said Stephen East, an analyst with Evercore ISI in St. Charles, Mo. "Entry-level buyers have been the missing piece of the recovery, and they are starting to come back."
Low borrowing costs are bolstering affordability for buyers. The average rate for a 30-year fixed mortgage was 3.71% this year through April, compared with 4.36% in the same period of 2014, according to Freddie Mac data. For all of 2015, the rate probably will average 3.9%, down from 4.2% last year, according to Doug Duncan, chief economist of Fannie Mae.
The number of markets with price gains in the first quarter was little changed from the previous three-month period, the Realtors group said.
The median price for an existing single-family home in the three months through March was $205,200, up 7.4% from the first quarter of 2014, according to the report.
Prices probably will gain 5.9% in 2015, compared with 5.7% in 2014, the association said in a forecast on its website. Sales of existing homes this year probably will rise 6.8% to 5.3 million after dropping about 3% in 2014. That would be the most since 2013, the first year of the housing recovery.
