Home prices increased in the second quarter of 2017 to yet another all-time high due to low levels of housing supply, according to the latest quarterly report from the National Association of Realtors.
The national median existing single-family home price increased 6.2% in the second quarter to $255,600. This is up from the second quarter of last year when home prices came in at $240,700, and surpassed the third quarter of 2016’s $241,300 as the new peak in quarterly median sales price.
Home prices increased in 87% of measured markets during the second quarter, or 154 out of 178 metropolitan statistical areas, the report showed. Only 23 areas recorded a decrease in median home prices from last year.
“The 2.2 million net new jobs created over the past year generated significant interest in purchasing a home in what was an extremely competitive spring buying season,” NAR Chief Economist Lawrence Yun said. “Listings typically flew off the market in under a month, and even quicker in the affordable price range, in several parts of the country.”
“With new supply not even coming close to keeping pace, price appreciation remained swift in most markets,” Yun said. “The glaring need for more new home construction is creating an affordability crisis that needs to be addressed by policy officials and local governments. An increasing share of would-be buyers are being priced out of the market and are unable to experience the wealth building benefits of homeownership.”
And the market shouldn’t expect new waves of inventory anytime soon. A new joint report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development shows housing starts and building permits decreased in July.
However, NAR’s report shows less metros are seeing double digit growth in home prices at 23 metros in the second quarter, down from 30 metros in the first quarter. But while less metros are in the double-digit range, more metros are seeing increases as only 85% of measured markets saw an increase in home prices in the first quarter.
At the end of the second quarter, there were a total of 1.96 million homes available for sale, down 7.1% from the 2.11 million home for sale at the end of the second quarter last year. This represents about 4.2 months’ worth of supply at the current sales rate, down from 4.6 months last year.
“Mortgage rates have subsided in recent months, which has only somewhat helped take away some of the sting prospective buyers are experiencing with the deteriorating affordability conditions in many areas,” Yun said. “Household incomes may be rising and giving consumers assurance that now is a good time to buy, but these severe inventory shortages will likely continue to be a drag on sales potential the second half of the year.”