Existing homes were sold in April at the fastest pace in history as the nation’s redhot housing market just kept getting hotter.
The National Association of Realtors reported Tuesday that existing singlefamily homes and condominiums were sold at a seasonally adjusted rate of 7.18 million units last month, a gain of 4.5 percent from a revised March sales pace of 6.87 million units.
The strength in sales, which was attributed to further declines in mortgage rates, put new upward pressure on prices. The median cost rose to a record $206,000, up 15.1 percent over a year ago.
That represented the biggest 12-month gain in prices since November 1980 and added to concerns that the housing industry could be experiencing a speculative bubble similar to the stock market bubble that popped in the spring of 2000. The median is the midpoint where half the homes sold for more and half for less.
The Valley’s market is a microcosm of those trends as home prices continue to escalate and sales continue to hit records, said Jay Butler, director of the Arizona Real Estate Center at Arizona State University East.
Last month, the median sale price of an existing home in the Valley was $221,000 with the number of year-to-date sales reaching a record 36,060.
"Since December of 2003, when the median sales price of an existing home was $156,000, we have not had any decline," Butler said. April’s price represents a 35 percent jump over April 2004 when the median sale price of a house was $164,000, Butler said.
The jump in home prices raised worries in financial markets that the Federal Reserve might be compelled to boost interest rates at a more aggressive clip, given that the eight quarter-point rate hikes since last June have done nothing to cool off demand for housing.
However, some of those concerns were eased later in the day with release of the minutes of the Fed’s last interest-rate setting discussion on May 3.
Those minutes showed that while Fed officials were worried about what high oil prices might do in terms of sparking broader inflation pressures, in the end they decided there was no need to raise rates more aggressively.
While Butler believes housing is a good long-term investment, it remains to be seen whether the market — those who are in it — can continue at their current clip.
"The issue is what happens now? We’ve got two good things — low interest rates and a reasonably good economy," Butler said.
"People have great expectations for the coming year and that is where the problem is going to be."
If housing prices go up another $40,000 owners or speculators may want to get out and put a property on the market.
But Butler wonders who might buy at such prices.
"It’s hard to sell if you don’t have any buyers," Butler said. "In the ’80s and ’90s, there were huge run-ups in prices. People wanted to sell and they just couldn’t."
The Fed minutes did show that the sharp jump in housing prices had attracted the attention of Fed policy-makers.
The minutes said housing prices were expected to moderate in coming months, although ‘‘a number of local real estate markets were still regarded as ‘hot,’ with signs of possible speculative excesses in some areas.’’
Last week, Fed Chairman Alan Greenspan acknowledged concerns about ‘‘froth’’ in the housing market.
‘‘We don’t perceive that there is a national bubble, but it’s hard not to see that . . . there are a lot of local bubbles,’’ he said in remarks to the Economic Club of New York.
It was Greenspan’s most direct expression of concern about the huge run-up in home prices in recent years, especially in certain parts of the country.
Butler said that the discussion about whether a real estate "bubble" is irrelevant, especially to investors, many of whom say, "I don’t know if there’s a bubble or not, but I’m not going to be around when it does explode," Butler said.
For the most part, Butler says Valley residents shouldn’t be alarmed.
"If you live in it, it’s not really an issue because the housing market does improve over time."