Home Prices Increase 4% Nationwide

The value of middle-class Americans’ most important assets - their homes - rose faster than inflation over the year ended in March, with the biggest gains reported in the Midwest and South.

Nationally, the median price of existing homes rose 4 percent to $119,400 - meaning half sold for more and half for less, the National Association of Realtors said Thursday.

In the Midwest, the median price jumped 5.6 percent to $102,000, double the 2.8 percent inflation rate over the period. The South did well too, posting a 3.9 percent gain to $102,900.

Housing markets in the Northeast were more sluggish, with the median rising 2.2 percent to $141,700. In the West, the median increased 3.1 percent to $153,700.

“In the Midwest, manufacturing is doing well and when the (local) economy is doing well, the housing market will do pretty well too,” said economist Kim Kennedy of Cahners Economics in Newton, Mass.

Nationally, home prices should continue to advance faster than inflation in the next year, though not quite as much as 4 percent, Kennedy and other analysts said. That should support continued strength in consumer spending.

“Clearly it’s a major positive for consumers’ confidence that their homes are appreciating and that they have a solid investment in addition to any gains they may have made in mutual funds,” said economist Lynn Reaser of Barnett Banks Inc. in Jacksonville, Fla.

In the year ended in March, the three markets with the biggest price gains were Greenville, S.C., up 15.8 percent to $111,100; Mobile, Ala., up 13.3 percent to $89,400; and Aurora, Ill., up 11.9 percent to $147,100.

Spokane home prices increased 1.1 percent to $99,700, according to the survey.

The solid gains in the South partly reflect the long-term demographic trend of people moving from the Northeast to the South and West, Reaser said.

But prices declined in 31 of the 131 metropolitan areas surveyed by the real estate trade group. Values fell 13.9 percent in Bradenton, Fla., to $86,500; 7.9 percent in Gary, Ind., to $88,100; and 5.4 percent in Honolulu to $313,800.

Reaser said Bradenton’s housing market is healthy and the drop in the median price probably reflected a shift in the mix of sales toward smaller homes. The price had risen 14.7 percent in the previous year.

Honolulu, still the nation’s priciest market despite the decline, has been hurt by a decline in tourism and investment from Japan, she said.

However, in the second most expensive market, San Francisco, the median price rose 7.5 percent to $271,100, reflecting the booming computer and high-tech industries. But the median fell 1.7 percent in Los Angeles to $169,200.

Other high-cost areas were Orange County, Calif., $215,300; Bergen, N.J., $210,900; and Boston, $183,300.

The lowest medians were in Ocala, Fla., $58,700; Waterloo, Iowa, $62,600; and Saginaw, Mich., $68,000.

Although in general prices rose faster in the Midwest than the Northeast, there were exceptions in each region.

“It’s the old location, location, location thing,” Kennedy said.