NAR 3Q Sales Report: Home Prices Going Up Everywhere
Two out of three (65%) metro areas had double-digit price gains in the July-Sept. time period, and single-family home sales rose in every area NAR tracks.
WASHINGTON – Every metro area tracked by the National Association of Realtors® (NAR) during the third quarter of 2020 saw home prices increase from a year ago, according to the association’s latest quarterly report.
Due in large part to record-low mortgage rates and a depleted housing inventory, median single-family home prices grew year-over-year in all 181 metropolitan statistical areas NAR tracks.
“Favorable mortgage rates will continue to bring fresh buyers to the market,” says Lawrence Yun, NAR chief economist. But Yun says even low interest rates won’t increase affordability “because housing prices are increasing much too fast.”
In 65% of NAR-tracked metros – 117 out of 181 – prices grew by double digits (10% or more) year-to-year. In comparison, only 15 metro areas recorded double-digit increases in 2020’s second quarter.
The biggest gainers in the third quarter were Bridgeport, Conn. (27.3%); Crestview, Fla. (27.1%); Pittsfield, Mass. (26.9%); Kingston, N.Y. (21.5%); Atlantic City, N.J. (21.5%); Boise, Idaho (20.6%); Wilmington, N.C. (20.6%); Barnstable, Mass. (19.4%); Memphis, Tenn. (19.1%); and Youngstown, Ohio (19.1%).
Nationally, the median existing single-family home price climbed 12.0% on a year-over-year basis to $313,500.
In addition to the metros, all four major regions tracked by NAR saw double-digit year-over-year price gains, led by the West (13.7%) and followed closely by the Northeast (13.3%), the South (11.4%), and the Midwest (11.1%).
That means that home prices grew four times faster than median family income (up 2.9%) in the third quarter of 2020.
“In light of the pandemic, prices jumped in a number of metros that contain larger properties and open space – where families could find extra rooms, including areas for an at-home office,” says Yun.
At the end of the third quarter, 1.47 million existing homes were available for sale – 19.2% less than total inventory at the end of 2019’s third quarter. In September 2020, housing inventory totals were equivalent to 2.7 months at the current sales pace.
With higher home prices, the monthly mortgage payment on a typical existing single-family home – one financed with a 30-year fixed-rate mortgage and 20% down payment – rose to $1,059 in the third quarter, and increased from $1,019 quarter-to-quarter and $1,032 year-to-year.
At the median U.S. family income of $81,477, mortgage payments accounted for 15.6% of income in the third quarter, an increase from the second quarter share of 14.8% but unchanged from the share one year earlier. The effective 30-year fixed mortgage rate averaged 3.01% in the third quarter, down from the second quarter (3.29%) and one year ago (3.71%).
With home prices continuing to rise, families needed roughly $50,819 in annual income to comfortably afford a mortgage on a typical existing single-family home, up from $48,912 in the second quarter and $49,536 this time last year. A 30-year fixed-rate, 20% down payment mortgage is considered affordable if the mortgage payment accounts for no more than 25% of a median family income of $81,477.
“As home prices increase both too quickly and too significantly, first-time buyers will increasingly face difficulty in coming up with a down payment,” says Yun. “Transforming raw land into developable lots and new supply are clearly needed to help tame the home price growth.”
© 2020 Florida Realtors®