Home prices continue to rise, but the pace slows in Q4
The National Association of Realtors (NAR) reported that 67% of metro markets saw double-digit home price gains in the fourth quarter of 2021.
Rising prices have slowed, however, with fewer markets seeing double-digit increases. In the prior quarter, 78% of the 183 markets measured by the NAR realized double-digit price appreciation.
Also, the median single-family existing-home price rose at a slower rate of 14.6% year-over-year to $361,700 compared to the year-over-year pace in the previous quarter (15.9%).
While the third quarter of 2021 saw all regions of the national achieve double-digit price gains, the fourth quarter saw only the South experience double-digit price appreciation of 17.9%. Prices increased 6.8% in the Northeast, 8.6% in the Midwest, and 7.7% in the West during the period.
“Homebuyers in the last quarter saw little relief as home prices continued to climb, albeit not as fast as earlier in the year,” said Lawrence Yun, NAR chief economist. “The increasing prices are indicative of a seller’s market, with an abundance of eager buyers and very limited supply.”
Metros in the Sunbelt and Mountain states topped the list of areas with the highest yearly price gains: Punta Gorda, Fla. (28.7%); Ocala, Fla. (28.2%); Austin-Round Rock, Texas (25.8%); Phoenix-Mesa-Scottsdale, Ariz. (25.7%); Sherman-Denison, Texas (25.1%); Tucson, Ariz. (24.9%); Las Vegas-Henderson-Paradise, Nev. (24.7%); Ogden-Clearfield, Utah (24.7%); Salt Lake City, Utah (24.4%); and Boise City-Nampa, Idaho (24.3%).
The top 10 most expensive markets in the fourth quarter experienced a surge in prices, with 9 of them doing so by double-digit percentages. California led the way with five metros in the top 10, along with five other areas.
“The strength of price gains are associated with the strength of the local job market, but the escalating prices took a toll on home shoppers, compelling many to come up with extra cash, and forcing others to delay making a purchase altogether,” said Yun. “A number of families, especially would-be first-time buyers, are increasingly being forced out of the market, and this is why supply is critical to expanding homeownership opportunity.”
Although the price pace has slowed, affordability has become a bigger issue. With mortgage rates on the rise, the housing market has become even more challenging, the NAR said.
In the fourth quarter, the average monthly mortgage payment on an existing single-family home –valued at $361,700 and financed with a 20% down payment, 30-year loan at a mortgage rate of 3.13% – rose to $1,240. This was an increase of $201 from one year ago (median price of $315,700; mortgage rate of 2.81%). Families typically spent 16.9% of their income on mortgage payments, while one year ago families spent 14.7%.
During this same period, a home purchase was unaffordable for a typical first-time buyer who was intending to purchase a home, according to the NAR. The typical mortgage payment on a 10% down payment loan on a typical starter home valued at $307,400 increased to $1,224, a rise of $198 from one year ago (starter home price of $268,300; mortgage rate of 2.81%).
First-time buyers generally spent 25.6% of their household income on mortgage payments, making a home purchase unaffordable. A mortgage is considered affordable if its payment (principal and interest) amounts to 25% or less of a family’s income, the NAR said.
“The good news is that home prices should begin to normalize later in 2022 as more homes come on the market,” said Yun.
In 20 markets where the median home sales price ranged from $537,400 to $1.675 million, a family needed more than $100,000 to afford a 10% down payment mortgage compared to 17 markets in the previous quarter.
In 81 markets where the median sales price was at least $267,700 or less – a family needed less than $50,000 to afford a home compared to 83 markets in the prior quarter.
