Home prices rebounded from their recession lows to end last year with the biggest yearly gain in seven years.
The National Association of Realtors said Monday the median price of homes sold in the fourth quarter of 2012 was up 10 percent from a year ago to $178,900.
"Home sales are on a sustained uptrend, mortgage interest rates are hovering near record lows and unsold inventory is at the lowest level in 12 years," Lawrence Yun, chief economist for the National Association of Realtors, said in a report released Monday. "Our population has been growing faster than overall housing stock, so supply and demand dynamics are very much at play."
Home prices also rose across most metropolitan areas in Tennessee and Georgia, including a 2.6 percent yearly gain in home prices in the Chattanooga market tracked by the NAR. Chattanooga's median home price of $132,000 in the fourth quarter was still 26.2 percent below the U.S. average, however.
In the home sales included in the multiple listing service by the Greater Chattanooga Association of Realtors, the median home price was pegged at $142,500, which was up 12.2 percent from a year ago.
The median price is where half of the homes sold for more and half sold for less.
Home sales in the fourth quarter of 2012 through the Chattanooga Realtors' listing service totaled 1,638 units, up more than 25 percent from a year ago.
Realtors said a shrinking market share of lower priced homes and foreclosed properties continues to account for some of the price growth. Distressed home sales through short sales or foreclosures comprised 23 percent of the market in the fourth quarter of 2012, down from 30 percent a year earlier.
Home buyers in the fourth quarter took advantage of record low mortgage interest rates, which fell to an average of 3.36 percent in the fourth quarter, according to Freddie Mac.
Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., and president of the National Association of Realtors, said housing prices probably fell too much after the 2008 housing slump hit the market and home prices are now adjusting to more normal levels.
"In reality, home prices over-corrected on the downside and homes in most of the country were selling for less than replacement construction costs, which means they were undervalued," he said.