Home price increase biggest in 25 years

U.S. home prices surged in the second quarter at the fastest pace in more than a quarter of a century, as a decline in interest rates fueled record sales.

The median price of an existing single-family home rose 13.6 percent, to $208,500, from a year earlier, the National Association of Realtors said Monday. It was the biggest jump since a 15.3 percent gain in the third quarter of 1979.

Existing-home sales rose 4.6 percent to an annualized pace of 7.22 million units, the highest ever.

"The continuing shortages of housing inventory are driving the price gains," David Lereah, the group's chief economist, said in the report. "There is no evidence of bubbles popping."

The average U.S. rate for a 30-year fixed mortgage dropped to 5.72 percent in the second quarter from 5.76 percent in the first quarter, according to Freddie Mac. A year ago, the rate was 6.13 percent.

During the quarter the median single-family home price rose in 142 cities and declined in seven, the group said. In the third quarter of 2003, after mortgage rates fell to the lowest level since the 1950s, all the metropolitan areas in the study had price gains for the only time in two decades.

The biggest second-quarter price gain was in the metropolitan areas around Phoenix and Mesa, Ariz., up 47 percent, to $243,400. Ft. Myers, Fla., was No. 2, gaining 45 percent, to $266,800. Palm Bay, Fla., had the third-largest increase, growing 40 percent, to $204,000.

The biggest price decline was in Kalamazoo, Mich., down 3.5 percent, to $122,600, followed by Youngstown, Ohio, where the median price fell 2.7 percent, to $82,900.

In the Midwest, the median existing-home price was $167,800, up 12.1 percent from the same period in 2004. The strongest increase was in the Davenport-Moline-Rock Island area of Iowa and Illinois, where the median price jumped 24 percent, to $133,900. Next came Rockford, which showed an 18.6 percent surge, to $122,700.

Regionally, the West showed the strongest increase, with the median price rising 19.5 percent, to $312,600.