Home prices rose sharply last summer

/ Source: The Associated Press

The booming U.S. housing market continued to push prices higher in the summer months with 69 metropolitan areas reporting double-digit increases compared with a year ago, a real estate trade group reported Tuesday.

The National Association of Realtors said that the median price of an existing home rose by 14.7 percent in the July-September quarter to $215,900, compared with a median price of $188,200 a year ago. The median is the midpoint where half the homes sold for more and half for less.

Led by Phoenix, Arizona, and Orlando, Florida, the nation's hottest markets far outperformed the nationwide figure. The price of existing homes sold during the third quarter in the Phoenix-Mesa-Scottsdale area jumped to $268,000, a whopping 55.2 percent higher than the same period a year ago. Orlando has the second biggest increase, a gain of 44.8 percent to $261,300, followed closely by Cape Coral-Fort Myers, Florida, where home prices were up 42.5 percent to $277,600.

Even with the big price gains shown in the new report, there have been growing signs that the housing boom may be reaching its peak.

Many economists are forecasting that sales, currently near record levels, will start to decline in coming months under the impact of rising mortgage rates. Freddie Mac's nationwide survey showed that the 30-year mortgage hit 6.36 percent last week, the highest level in more than two years.

Some economists have expressed concern that housing could suffer a sharp decline much like the bursting of the speculative bubble in the stock market in 2000.

However, most analysts believe that rising mortgage rates will simply moderate the double-digit gains in home prices that home sellers have enjoyed in recent years, rather than cause sharp declines in home prices.

"The good news is that inventory levels are improving and housing supply will come closer to buyer demand in 2006," said David Lereah, chief economist for the Realtors. "We expect a healthy and more balanced market next year."

The Realtors' latest survey showed that 69 metropolitan areas — nearly half of the 147 areas surveyed — enjoyed double-digit price gains in the July-September quarter compared with a year earlier.

At the other end of the scale, six metro areas saw small price declines, led by a 5.4 percent drop in home prices in Elmira, New York, where the median price fell to $77,100, compared with $81,500 in the third quarter of 2004.