Realtors Warn About Rising Home Prices in 80% of Metro Areas

Home prices increased in 80% of the 221 metro markets analyzed by the National Association of Realtors (NAR) in the third quarter. Eleven percent of the metros experienced double-digit price increases, up from 5% in the second quarter.

“Homeowners have accumulated sizable wealth, with a typical homeowner gaining more than $100,000 in overall net worth since 2019 and before the height of the pandemic,” says NAR chief economist Lawrence Yun. “However, the persistent lack of available homes on the market will make the dream of homeownership increasingly difficult for younger adults unless housing supply is significantly boosted.”

The national median single-family existing-home price increased 2.2% to $406,900 after decreasing 2.4% in the second quarter.

“Following the big price changes during the last several years, it’s natural to witness momentary swings in prices,” says Yun. “Some markets that experienced sizable home price gains since 2020 have turned lower, resulting in temporary relief for prospective home buyers. Also, a few markets in the West that experienced price declines in the prior quarter have seen prices rise again.”

The South saw the largest share of single-family existing-home sales (46%) in the third quarter, with year-over-year price appreciation of 1.7%. Prices grew 5.3% in the Northeast, 5.2% in the Midwest, and 0.6% in the West. Prices rose by 9.6% year over year in San Jose, California; 8.7% in Anaheim, California and San Diego; 6.6% in Boston; and 5.7% in Miami. Prices retreated on a year-over-year basis in Austin, Texas (-10.3%); Phoenix (-1.5%); Salt Lake City (-1.2%); Dallas (-1.1%); and Houston (-1.1%).

Eight of the top 10 most expensive markets were in California, including San Jose-Sunnyvale-Santa Clara (median price of $1,850,000), Anaheim-Santa Ana-Irvine ($1,305,000), San Francisco-Oakland-Hayward ($1,300,000), San Diego-Carlsbad ($978,500), Salinas ($945,300), Oxnard-Thousand Oaks-Ventura ($921,500), Los Angeles-Long Beach-Glendale ($897,600), and San Luis Obispo-Paso Robles ($889,900). The other most expensive markets are Urban Honolulu, Hawaii, and Boulder, Colorado.

Six of the markets with the largest year-over-year price increases were in the Midwest, including Fond du Lac, Wisconsin; Oshkosh-Neenah, Wisconsin; Green Bay, Wisconsin; Dayton, Ohio; Fort Wayne, Indiana; and Kankakee, Illinois.

“With consumer inflation becoming more manageable, the Federal Reserve needs to consider cutting interest rates,” says Yun. “In turn, Congress must consider incentives to boost housing supply and inventory so that more Americans can participate in wealth accumulation. The housing market shouldn’t be accessible only to those who are paying in cash nor become a playground for the wealthy.”

According to the NAR, housing affordability conditions worsened in the third quarter because of increasing home prices and mortgage rates. The monthly mortgage payment on a typical home with a 20% down payment increased 7% sequentially to $2,192 in the third quarter. The payment is 19.2% higher than the third quarter of 2022. Families typically spent 26.8% of their income on mortgage payments, up from 23.5% a year ago.

The lack of existing inventory also continued to impact first-time buyers during the quarter. For the typical starter home valued at $345,900 with a 10% down payment loan, the monthly mortgage payment rose to $2,149, a 19% increase from a year ago. First-time buyers also typically spent 40.4% of their family income on mortgage payments, up from 38.2% in the second quarter of 2022.

A family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 45.7% of markets. Conversely, a family with an income of less than $50,000 could only afford to buy in 2.7% of markets.