In a tight market, home prices tick up slightly

U.S. home prices are cooling slightly in some markets after two years of fast-paced recovery, the National Association of Realtors said Tuesday.

Nationwide, the median price for existing single-family homes in the second quarter rose 4.4% from a year earlier, to $212,400. The increase, the smallest annual gain in two years, comes after double-digit growth in 2013.

"The market is moving from being somewhat heated to a balanced market," says Lawrence Yun, chief economist for NAR. "We're returning to more moderate middle ground."

In Salem, Ore., where NAR reported a 24% year-over-year increase in sales prices, broker Gladys Blum says that 2014 has been steady.

"Last year was good, I'll say that for sure," she said. Her team sold 210 homes in 2013, and expects to meet similar numbers this year. But unlike hot markets such as Portland, where inventory is tight, Salem still has many houses sitting on the market.

Despite price gains in recent years, there's still a ways to go to recover from the housing crash, she says. "Our prices still are not what they were in 2007."

This spring, median prices for single-family homes rose in about 70% of the 173 metro areas in the NAR's second-quarter report, a small decrease from the first quarter. Forty-seven markets, or 27%, showed lower median prices from a year earlier, many of them in rust-belt areas of the Midwest and the Northeast.

In Albany, N.Y., a cold spring is partly to blame for a sluggish start to 2014, says Laura Burns, chief executive officer of the Greater Capital Association of Realtors. Prices there dropped 4.8% over the past year, NAR data show.

"We're a month or two behind of what we'd normally have happening in the market," she says, adding that just recently, members had begun reporting more inventory and stronger sales.

Only 19 areas racked up double-digit gains in the April-June period, sharply below the first-quarter total of 37 areas and the average of 43 since last year's second quarter.

Yun says as inventory continues to rise, the remaining areas with double-digit gains should see price gains return to earth within the next two quarters — "certainly within a year" — with 2015 increases more closely mirroring income growth.

That, he says, could be a boon for buyers worried about being priced out of the market. Sellers won't see huge leaps in home values, but "most homeowners do not have to be concerned about a price reversal."

Four of the five most expensive housing markets in the second quarter were in California. San Jose's median single-family home price was $899,500. The next four were San Francisco, $769,600; Anaheim-Santa Ana, Calif., $691,900; Honolulu, $678,500; and San Diego, $504,200.

The five lowest-cost metro areas were Youngstown-Warren-Boardman, Ohio, $78,600; Rockford, Ill., $85,300; Elmira, N.Y., $87,800; Decatur, Ill., $90,900; and Toledo, Ohio, $95,900.

Inventory of homes for sale improved at the end of the second quarter to 2.3 million existing homes for sale, 6.5% higher than a year earlier. The average supply was 5.6 months compared with the six-month level that the NAR considers roughly balanced between buyers and sellers.