Homes in 86 Percent of U.S. Metros Enjoyed Price Gains in Q4

Inman News

Falling rates helped drive home price growth in Q4, NAR says. US home prices shot up in 86% of the 221 metropolitan areas tracked by the National Association of Realtors and rose 3.5% in the fourth quarter, according to data released by NAR.

Home price appreciation accelerated across much of the country in the fourth quarter of last year, according to a quarterly update from the National Association of Realtors released Thursday.

The price for single-family homes rose in 86 percent of the 221 metropolitan areas tracked by NAR. The median price rose 3.5 percent from a year earlier, to $391,700.

The gains marked an acceleration in price growth compared to earlier in 2023, when median prices rose 2.2 percent, and grew in 82 percent of metro areas.

“Homeowners have benefited from housing wealth accumulation,” NAR Chief Economist Lawrence Yun said in a statement. “However, many homebuyers have been shocked at high housing costs, with a typical monthly mortgage payment rising from $1,000 three years ago to more than $2,000 last year,” “This doubling in housing costs for recent home buyers is not included in the official consumer price index inflation calculations and contributes to the sense of dissatisfaction about the economy.”

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The rise in prices came as the 30-year fixed mortgage rate fell from an October high of 7.79 percent to 6.61 percent. It was also fueled in part by a lack of inventory, constraining supply amid high demand for homes.

The typical monthly payment for a mortgage on a single-family home rose to $2,163, 10 percent higher than a year earlier but down 1.2 percent from the third quarter, when mortgage rates were climbing toward post-pandemic highs.

The fall of housing affordability is particularly acute for first-time homebuyers, who spent 39.4 percent of their family income on mortgage payments. Households are considered cost-burdened if they spend more than 30 percent of their monthly income on housing, according to the U.S. Department of Housing and Urban Development.

In nearly half of the markets — 47.1 percent — buyers needed $100,000 to afford a 10 percent down payment.

Home prices fell in 14 percent of the 221 markets tracked by NAR.

“Sales were restrained due to limited inventory,” Yun said. “But increased homebuilding, along with lower mortgage rates, will not only improve housing affordability but also help bring more homes onto the market in 2024.”

The figures largely track other reports that show home price appreciation accelerated toward the end of the year. The S&P CoreLogic Case-Schiller Index reported last week that home prices increased 5.1 percent between November 2022 and November 2023, a pick-up from the previous month which saw annual growth of 4.7 percent.

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Fifteen percent of the 221 tracked metro areas experienced double-digit price gains over the same period, up from 11% in the third quarter.

Among the major U.S. regions, the South posted the largest share of single-family existing-home sales (45%) in the fourth quarter, with year-over-year price appreciation of 3.2%. Prices also climbed 7.3% in the Northeast, 4.7% in the Midwest and 4.2% in the West.

The top 10 metro areas with the largest year-over-year median price increases, which can be influenced by the types of homes sold during the quarter, all recorded gains of at least 14.8%. Those include Dayton, Ohio (19.9%); Kingsport-Bristol-Bristol, Tenn.-Va. (19.2%); Fond du Lac, Wis. (18.6%); Trenton, N.J. (17.3%); Salinas, Calif. (17.1%); Newark, N.J.-Pa. (16.7%); Anniston-Oxford, Ala. (15.7%); Bloomington, Ill. (15.4%); Johnson City, Tenn. (15.2%); and Anaheim-Santa Ana-Irvine, Calif. (14.8%).

Eight of the top 10 most expensive markets in the U.S. were in California. Overall, those markets are San Jose-Sunnyvale-Santa Clara, Calif. ($1,750,300; 11%); Anaheim-Santa Ana-Irvine, Calif. ($1,299,500; 14.8%); San Francisco-Oakland-Hayward, Calif. ($1,251,000; 4.3%); Urban Honolulu, Hawaii ($1,069,400; -1.9%); Salinas, Calif. ($993,900; 17.1%); San Diego-Carlsbad, Calif. ($931,600; 8.7%); Oxnard-Thousand Oaks-Ventura, Calif. ($916,800; 7.9%); San Luis Obispo-Paso Robles, Calif. ($912,100; 5.7%); Los Angeles-Long Beach-Glendale, Calif. ($884,400; 6.7%); and Boulder, Colo. ($849,400; 11.8%).

Less than one-fifth of markets (14%; 32 of 221) experienced home price declines in the fourth quarter, down from 17% in the third quarter.

Housing affordability marginally improved in the fourth quarter on the back of declining mortgage rates. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $2,163, down 1.2% from the third quarter ($2,189) but up 10% – or $196 – from one year ago. Families typically spent 26.1% of their income on mortgage payments, down from 26.7% in the previous quarter but up from 24.2% one year ago.

Lack of inventory and affordability continued to impact first-time buyers during the fourth quarter. For a typical starter home valued at $332,900 with a 10% down payment loan, the monthly mortgage payment fell slightly to $2,120, down 1.2% from the prior quarter ($2,146). However, that was an increase of $190, or 9.8%, from one year ago ($1,930). First-time buyers typically spent 39.4% of their family income on mortgage payments, down from 40.3% in the prior quarter.

A family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 47.1% of markets, up from 45.7% in the previous quarter. Yet, a family needed a qualifying income of less than $50,000 to afford a home in 2.3% of markets, down from 2.7% in the prior quarter.