The National Association of Realtors (NAR) released its latest quarterly Metropolitan Median Area Prices and Affordability report, which revealed the uptick in existing-home sales in the last three months of 2017 led to an all-time low in inventory and robust home price growth.
The median existing single-family home price increased in 162 out of 177 measured markets, and only 15 markets reported lower median prices compared to Q4 2016. Furthermore, 26 metro areas experienced double-digit increases and 18 metro areas shot past their previous peak sales price.
The national median single-family home price in Q4 was $247,800, a 5.3 percent year-over-year increase.
“A majority of the country saw an upswing in buyer interest at the end of last year, which ultimately ended up putting even more strain on inventory levels and prices,” said NAR chief economist Lawrence Yun in a statement.
“Remarkably, home prices have risen a cumulative 48 percent since 2011, yet during this same timeframe, incomes are up only 15 percent. In the West region, where very healthy labor markets are driving demand, the gap is even wider.”
“These consistent, multi-year price gains have certainly been great news for homeowners, and especially for those who were at one time in a negative equity situation; however, the shortage of new homes being built over the past decade is really burdening local markets and making homebuying less affordable.”
Median prices and incomes
Despite the median household income increasing to $74,492, higher home prices and a spike in mortgage rates continued to weaken affordability. In order to buy a single-family home at the national median price, a buyer making a 5 percent down payment would need a yearly income of $55,585.
A buyer making a 10 percent down payment would need a yearly income of $52,659, and a buyer making a 20 percent down payment would need a yearly income of $46,808.
“While tight supply is expected to keep home prices on an upward trajectory in most metro areas in 2018, both the uptick in mortgage rates and the impact of the new tax law on some high-cost markets could cause price growth to moderate nationally,” added Yun.
“In areas where homebuilding has severely lagged job creation in recent years, it’s going to be a slow slog before there’s enough new construction to cool price appreciation to a pace that aligns more closely with incomes.”
The areas where buyers are feeling the crunch from high median home prices are:
- San Jose, California ($1,270,000)
- San Francisco, California ($920,000)
- Anaheim-Santa Ana, California ($785,000)
- Urban Honolulu ($760,600)
- San Diego, California ($610,000)
The five most affordable cities are:
- Cumberland, Maryland ($84,600)
- Youngstown-Warren-Boardman, Ohio ($90,200)
- Decatur, Illinois ($100,000)
- Binghamton, New York ($108,900)
- Wichita Falls, Texas ($110,400)
Here’s the regional breakdown, straight from NAR:
Total existing-home sales in the Northeast jumped 10.1 percent in the fourth quarter but are 0.4 percent below the fourth quarter of 2016. The median existing single-family home price in the Northeast was $268,100 in the fourth quarter, up 4.2 percent from a year ago.
In the Midwest, existing-home sales rose 6.0 percent in the fourth quarter and are 2.3 percent above a year ago. The median existing single-family home price in the Midwest grew 7.2 percent to $193,800 in the fourth quarter from the same quarter a year ago.
Existing-home sales in the South increased 3.8 percent in the fourth quarter and are 1.8 percent higher than the fourth quarter of 2016. The median existing single-family home price in the South was $221,600 in the fourth quarter, 5.0 percent above a year earlier.
In the West, existing-home sales in the fourth quarter were at an annualized rate of 1.23 million (unchanged from the third quarter), up 0.3 percent from a year ago. The median existing single-family home price in the West increased 7.2 percent to $374,400 in the fourth quarter from the fourth quarter of 2016.