Anyone trying to make sense out of current data on the direction of home prices needs more than a calculator.  Every new report seems to dump more mud in the water, show price growth slowing, stabilized or driven higher by falling interest rates. This is understandable given the two-month lag-time of most price indices, but Wednesday's slightly more timely report from the National Association of Realtors® (NAR) doesn't add any clarity.

The report on second quarter metropolitan home prices shows that most of those areas saw price gains during the reporting period with single-family median prices increasing in 91 percent or 162 of the 178 markets tracked.  That is up from 86 percent that saw increases in the first quarter.  The median price of a single-family home gained 4.13 percent on an annual basis to $279,600.

There were glaring exceptions to the price increases, largely in expensive locations where median home prices exceed a half-million dollars. The priciest area, San Jose/Santa Clara saw a 5.3 percent drop in prices and the second highest, San Francisco/Oakland-Hayward had a 1.9 percent decline.  Homes in Urban Honolulu dropped by 1.2 percent, followed by Boulder with a 0.9 percent slide.  On the other hand, ten moderately priced metros had double-digit annual increases including Boise, Abilene, Texas; Columbia, Missouri, and Burlington, Vermont.

Lawrence Yun, NAR chief economist, said despite the need for new homes, construction fell in the first half of the year.  "This leads to continuing tight inventory conditions, especially at more affordable price points. Home prices are mildly reaccelerating as a result," he said.

Ninety-three of the 178 markets had price growth of 5 percent or better and Yun said lack of affordability will hinder sales regardless of the job situation in a local market.  "This is evident in the very expensive markets as home prices are either topping off or slightly falling."

Despite the substantial decline in the median price, San Jose remains the most expensive metro market. The median existing single-family price was $1,330,000. It was followed by San Francisco/Oakland at $1,050,000; Anaheim-Santa Ana, $835,000; Urban Honolulu and San Diego at $785,500 and $655,000 respectively.

The five lowest-cost metro areas in the second quarter were Decatur, $97,500; Youngstown, $107,400, and Cumberland, Maryland $117,800.  Two New York metros, Binghamton and Elmira, were fourth and fifty each with median prices slightly above $119,000.

NAR says the national median income increased to $78,366 in the second quarter, but affordability still declined.  A buyer making a 5 percent down payment would need an income of $62,192 to purchase a single-family home at the national median price, income of $58,918 at 10 percent down, and $52,372 would be required with 20 percent down.  In the most expensive areas in the West, buyers would need incomes of well over $225,000 to avoid paying more than 25 percent of their income on mortgage payments

At the end of the second quarter there were approximately 1.93 million existing homes for sale, about the same as at the same time in 2018.  This was estimated at a 4.4-month supply.

Looking forward, Yun says, "The exceptionally low mortgage rates will help with housing affordability over the short run. But if the low interest rates are due to weakening economic confidence, as reflected from a correction in the stock market, then the low rates will not help with job growth and will eventually hinder home buying and home construction."