As housing inventory sank to its all-time low during the fourth quarter, home prices increased, creating all-new highs in many U.S. markets, according to the latest quarterly report from the National Association of Realtors.
The national median existing single-family home price in the fourth quarter came in at $247,800, up 5.3% from $235,400 in the fourth quarter of 2016. During the third quarter, home prices increased 5.6% from the third quarter of 2016.
Single-family home prices increased in 92% of measured markets, or 162 out of 177 metropolitan statistical areas. In fact, 15% of metro areas saw double digit increases, and now 64% of markets reached a new all-time high in home prices. This is up by 18 metros from last quarter.
“A majority of the country saw an upswing in buyer interest at the end of last year, which ultimately ended up putting even more strain on inventory levels and prices,” NAR Chief Economist Lawrence Yun said. “Remarkably, home prices have risen a cumulative 48% since 2011, yet during this same timeframe, incomes are up only 15%. In the West region, where very healthy labor markets are driving demand, the gap is even wider.”
“These consistent, multi-year price gains have certainly been great news for homeowners, and especially for those who were at one time in a negative equity situation; however, the shortage of new homes being built over the past decade is really burdening local markets and making home buying less affordable,” Yun said.
Total existing home sales, including single family and condos, increased 4.3% during the fourth quarter to a seasonally adjusted annual rate of 5.62 million, up from 5.39 million in the third quarter. This is also up 1.3% from the 5.55 million pace in the fourth quarter of 2016.
But due to these higher levels of home sales, existing homes for sale shrank 10.3% from the 1.65 million homes at the end of the fourth quarter of 2016 to an average supply of just 3.5 months. This represents a new low in housing inventory and is down from 4.2 months of supply in the fourth quarter of the previous year.
And despite the national family median income rising to $74,492 in the fourth quarter, affordability still dropped due to increasing home prices and rising mortgage rates.
“While tight supply is expected to keep home prices on an upward trajectory in most metro areas in 2018, both the uptick in mortgage rates and the impact of the new tax law on some high-cost markets could cause price growth to moderate nationally,” Yun said. “In areas where homebuilding has severely lagged job creation in recent years, it’s going to be a slow slog before there’s enough new construction to cool price appreciation to a pace that aligns more closely with incomes.”