If you’ve seen house prices going up in your area, you’re not alone…by any stretch. In fact, house prices are on the rise in every single major housing market in the U.S.
According to a new report from the National Association of Realtors, each of the 181 metro areas tracked by the group’s economists saw house prices increase during the third quarter of 2020.
Beyond that, approximately 65% of the markets (117 markets out of 181 total) saw home prices rise by at least 10% over the same time period last year.
That’s a substantial increase from the number of markets that increased by double-digits in the second quarter, when only 15 markets reported price increases of 10% or more.
That level of increase may not be sustainable, according to NAR Chief Economist Lawrence Yun, due to the lack of available inventory and decreasing affordability.
“Favorable mortgage rates will continue to bring fresh buyers to the market,” Yun said. “However, the affordability situation will not improve even with low interest rates because housing prices are increasing much too fast.”
Overall, the median price for an existing single-family home nationwide was $313,500, which was 12% above what prices were in the third quarter of 2019.
According to NAR’s report, all four major regions saw increases of more than 10%, with the West leading the way at 13.7%. That was followed by the Northeast, where prices rose by 13.3%; the South, where home prices rose by 11.4%; and the Midwest, where home prices increased 11.1%.
Nationwide, the markets that saw the biggest gains in the third quarter were Bridgeport, Connecticut (27.3%); Crestview, Florida (27.1%); Pittsfield, Massachusetts (26.9%); Kingston, New York (21.5%); Atlantic City, New Jersey. (21.5%); Boise, Idaho (20.6%); Wilmington, North Carolina (20.6%); Barnstable, Massachusetts (19.4%); Memphis, Tennessee (19.1%); and Youngstown, Ohio (19.1%).
“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,” Yun said.
On the inventory front, NAR’s report showed that at the end of the third quarter, there were 1.47 million existing homes available for sale. That’s 19.2% lower than the total inventory at the end of the third quarter last year.
That combination of rising prices and declining inventory is negatively impacting affordability, in spite of how low interest rates have been this year.
According to NAR, families needed approximately $50,819 in annual income to “comfortably” afford a mortgage on the typical single-family home. That’s up from $48,912 in the second quarter and $49,536 in the third quarter of last year.
NAR defines a home as affordable if the mortgage payment on a 30-year fixed-rate mortgage with a 20% down payment is no more than 25% of the family’s income.
“As home prices increase both too quickly and too significantly, first-time buyers will increasingly face difficulty in coming up with a down payment,” Yun said. “Transforming raw land into developable lots and new supply are clearly needed to help tame the home price growth.”