With inventory levels at record lows, strong buyer demand prompted home prices to rise at a faster pace in the first quarter of this year, according to the latest report by the National Association of REALTORS®.
The national median existing single-family home price in the first three months of this year was $245,500. That is up 5.7 percent compared to a year ago.
Further, single-family home prices rose in 91 percent of the measured markets in the first quarter—162 out of 178 tracked metro areas, according to NAR. Fifty-three metro areas, or 30 percent, posted double-digit increases, which is up from 15 percent in the fourth quarter of 2017.
“The worsening inventory crunch through the first three months of the year inflicted even more upward pressure on home prices in a majority of markets,” says Lawrence Yun, NAR’s chief economist. “Following the same trend over the last couple of years, a strengthening job market and income gains are not being met by meaningful sales gains because of unrelenting supply and affordability headwinds.”
Real estate professionals in areas with strong job markets are reporting that consumers are getting frustrated, Yun says. “Home shoppers are increasingly struggling to find an affordable property to buy, and the prevalence of multiple bids is pushing prices further out of reach,” he adds.
At the end of the first quarter, 1.67 million existing homes were available for sale, which is 7.2 percent below the number of homes for sale in the first quarter of 2017.
As home prices rise, more consumers are getting priced out of the market, even though their incomes are rising too. The national family median income increased to $74,779 in the first quarter. However, housing affordability fell from a year ago due to rising mortgage rates and increasing home prices, NAR reports. To buy a single-family home at the national median price, a buyer making a 5 percent down payment would need to earn an income of $55,732; a 10 percent down payment would require an income of $52,779; and a 20 percent down payment would need a $46,932 income, NAR reports.
“Prospective buyers in many markets are realizing that buying a home is becoming more expensive in 2018,” Yun says. “Rapid price gains and the quick hike in mortgage rates are essentially eliminating any meaningful gains buyers may be seeing from the combination of improving wage growth and larger paychecks following this year’s tax cuts. It’s simple: Homebuilders need to start constructing more single-family homes and condominiums to overcome the rampant supply shortages that are hampering affordability.”
The five priciest housing markets in the first quarter were San Jose, Calif. ($1,373,000—the median existing single-family home price); San Francisco-Oakland-Hayward, Calif. ($917,000); Anaheim-Santa Ana-Irvine, Calif. ($810,000); urban Honolulu ($775,500); and San Diego-Carlsbad, Calif. ($610,000).
On the other spectrum, the five lowest-cost metros in the first quarter were Decatur, Ill. ($73,000); Cumberland, Md. ($86,200); Youngstown-Warren-Boardman, Ohio ($91,300); Elmira, N.Y. ($100,800); and Binghamton, N.Y. ($103,000).