Home Prices Up, Grow in 91 Percent of Markets
In the majority of metropolitan regions, home prices remain on the rise, according to the latest National Association of REALTORS® quarterly report, released this week.
Across the largest markets in the U.S., 91 percent posted upticks, escalating the median nationally to $279,600—a 4.3 percent gain year-over-year.
With an absence of inventory in the most-needed price ranges, the boost is encumbering sales, which, on an annual basis declined 2.2 percent in June. According to the report, 1.93 million homes were on the market in Q2, approximately the same as this time in 2018, at 4.4 months’ supply.
“New-home construction is greatly needed; however, home construction fell in the first half of the year,” says Lawrence Yun, chief economist at NAR. “This leads to continuing tight inventory conditions, especially at more affordable price points. Home prices are mildly reaccelerating as a result.” Construction decreased 0.9 percent in June, the Commerce Department recently reported.
Amid inventory pressures, the ability to afford a home is waning, as earnings fail to keep pace with prices. According to the NAR report, although household incomes in Q2 rose to $78,366 (the median nationally), appreciation in the housing market surpassed it—a concern, and especially in expensive markets. Considering the median national price, a buyer with a 5 percent down payment needs $62,192; at 10 percent down, $58,918; and at 20 percent down, $52,372.
In costlier markets, prices reversed, specifically in San Jose, down 5.3 percent in Q2; in San Francisco, down 1.9 percent; and in Honolulu, down 1.2 percent, the report shows. On the other end of the spectrum, in areas like Boise; Burlington, Vt.; and Columbia, Mo., prices surged, climbing by double digits.
“Housing unaffordability will hinder sales irrespective of the local job market conditions,” Yun says. “This is evident in the very expensive markets, as home prices are either topping off or slightly falling.”
Affordability could revive, according to Yun, if conditions hold for low mortgage rates—and broader factors in the economy strengthen.
“The exceptionally low mortgage rates will help with housing affordability over the short run, but if the low interest rates are due to weakening economic confidence, as reflected from a correction in the stock market, then the low rates will not help with job growth and will eventually hinder home-buying and home construction,” he says.
Last week, the Federal Reserve announced a cut to interest rates, but its affect on the housing market remains to be seen.
San Jose-Sunnyvale-Santa Clara, Calif. – $1,330,000
San Francisco-Oakland-Hayward, Calif. – $1,050,000
Anaheim-Santa Ana-Irvine, Calif. – $835,000
Honolulu, Hawaii – $785,500
San Diego-Carlsbad, Calif. – $655,000
Decatur, Ill. – $97,500
Youngstown-Warren-Boardman, Ohio – $107,400
Cumberland, Md. – $117,800
Binghamton, N.Y. – $119,300
Elmira, N.Y. – $119,400