Home prices are still on an upturn, up 5.3 percent in the fourth quarter of 2017, according to the latest quarterly report by the National Association of REALTORS® (NAR).
“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,” says Lawrence Yun, chief economist of NAR. “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 home-buying less affordable.”
Single-family home prices went up in 92 percent of markets assessed in the report, or 162 of 177 metropolitan statistical areas (MSAs). Fifteen percent of, or 26, metro areas saw prices up by double digits. At the national level, the median single-family home price was $247,800, and the median existing condominium price was $237,500.
Home prices in the Midwest and West grew at the highest year-over-year rate, both 7.2 percent to a median existing single-family value of $193,800 and $374,400, respectively, according to the report. Prices in the South followed, at 5.0 percent to a median $221,600. Prices in the Northeast grew at the lowest year-over-year rate, 4.2 percent to a median $268,100.
Affordability also declined in the fourth quarter. A homebuyer with a 5 percent down payment would need an income of $55,585 to afford a single-family home priced at the national median. A homebuyer with a 10 percent down payment would need an income of $52,659, and a homebuyer with a 20 percent down payment would need an 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,” Yun says. “In areas where home-building 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 most expensive metro areas by median existing single-family price in the fourth quarter were: San Jose, Calif. ($1,270,000); San Francisco-Oakland-Hayward, Calif. ($920,000); Anaheim-Santa Ana-Irvine, Calif. ($785,000); urban Honolulu, Hawaii ($760,600); and San Diego-Carlsbad, Calif. ($610,000). The least expensive areas were: Cumberland, Md. ($84,600); Youngstown-Warren-Boardman, Ohio ($90,200); Decatur, Ill. ($100,000); Binghamton, N.Y. ($108,900); and Wichita Falls, Texas ($110,400).
Existing-home sales, including condos, rose 4.3 percent to 5.62 million in the fourth quarter, according to the report. Existing homes available for sale were down 10.3 percent year-over-year to 1.48 million at the end of the quarter, with an average supply of 3.5 months.