Lack of inventory once again pushed against home prices, causing them to accelerate faster in the third according, according to the most recent quarterly report from the National Association of Realtors.
The median existing single-family home price increased in 87% of the 178 measured metropolitan areas. Seven of the top 10 markets with home price increases were in the West, including San Jose, California, where the median home price hit $1 million for the second quarter in a row.
On the other hand, 22 metro areas, about 12%, recorded lower median home prices from than last year.
“Mortgage rates around historical lows and solid local job creation created a winning formula for sustained homebuying demand all summer long,” NAR Chief Economist Lawrence Yun said.
“Unfortunately for house hunters in several of the top job producing metro areas around the country, deficient supply levels limited their options and drove prices higher – especially in markets in the West and South,” Yun said.
The national median single-family home price hit $240,900 in the third quarter, up 5.2% from last year’s $228,900 and last quarter’s $240,700. It just hit the current peak in quarterly median sales price.
Possibly due to lack of inventory, existing home sales including single-family and condos, decreased 2.2% to a seasonally adjusted annual rate of 5.38 million in the third quarter. This is down from 5.5 million in the second quarter, and 0.4% lower than last year’s 5.4 million.
“After climbing to their highest annual pace in over nine years in June, sales sputtered in the third quarter because inventory could not catch up with what was being quickly sold,” Yun said. “Only a decent rebound in September kept the monthly and annual sales declines from being even larger.”
At the end of the quarter there were 2.04 million existing homes available for sale, 6.8% less than last year. The average supply for the quarter was 4.6 months, down from 4.9 months last year.
And yet, despite all of this, affordability is still improved from last year due to higher incomes and lower interest rates. As it stands, a buyer making a 5% down payment would need an income of $51,661, a 10% down payment would require an income of $48,942, and a $43,504 income for a 20% down payment.
In fact, when adjusting for inflation and the amount of purchase power provided by low interest rates, home prices actually dropped in the past 16 years, First American Chief Economist Mark Fleming said in an interview with HousingWire and the Mortgage Bankers Association annual in Boston.
“If mortgage rates start to rise heading into next year, prospective buyers could face weakening affordability conditions in their market unless supply dramatically improves,” Yun said. “That’s why it’s absolutely imperative that homebuilders ramp up the production of more single-family homes to meet demand and slow price growth.”
