The fourth quarter of 2016 saw the best quarterly sales pace of the year, but also pushed housing inventory to record lows, and many markets to home prices with record highs, according to the latest quarterly report from the National Association of Realtors.
Actually, home prices in over half of measured markets either hit or surpassed their previous peak level, according to the report. The median existing single-family home price increased in 89% of measured markets. While 158 of metro areas saw gains from the fourth quarter of 2015, the remaining 20 metros recorded lower home prices than the year before.
“Buyer interest stayed elevated in most areas thanks to mortgage rates under 4% for most of the year and the creation of 1.7 million new jobs edging the job market closer to full employment,” NAR Chief Economist Lawrence Yun said. “At the same time, the inability for supply to catch up with this demand drove prices higher and continued to put a tight affordability squeeze on those trying to reach the market.”
This is more than the third quarter, when 87% of metros reported annual price increases. Also, of the metros that saw price gains, 17% of them were in the double digits, compared to 14% in the third quarter.
“Depressed new and existing inventory conditions led to several of the largest metro areas seeing near or above double-digit appreciation, which has pushed home values to record highs in a slight majority of markets,” Yun said. “The exception for the most part is in the Northeast, where price growth is flatter because of healthier supply conditions.”
The national median existing single-family home price in the fourth quarter was $235,000, which is up 5.7% from the fourth quarter of 2015’s $222,300.
While home prices were reaching new highs, housing inventory was reaching new lows. At the end of the fourth quarter there were 1.65 million existing homes available for sale, a decrease of 6.3% from the 1.76 million homes a year before to the lowest level since NAR began tracking home supply in 1999. The average supply during the fourth quarter was 3.9 months, down from 4.6 months the year before.
“The prospect of higher mortgage rates and more home shoppers in coming months should be enough of an incentive for those serious about buying to start their search now,” NAR President William Brown said.
“There are fewer listings on the market, but also a little less competition than what’s expected this spring,” Brown said. “Buyers may find just the home they’re looking for at a good price and without the possibility of having to outbid others.”