Inventory levels hovered at all-time lows in the first quarter of 2018, driving up home prices, according to the latest quarterly report from the National Association of Realtors.
The median existing single-family home price increased 5.7% from the first quarter of 2017 to $245,500 in the first quarter of 2018. This is up from the annual home price increase of 5.3% in the fourth quarter.
And the increases occurred in nearly every corner of the U.S., rising in 91% of measured markets as 162 out of 178 metropolitan statistical areas saw price gains in the first quarter. In fact, 53 of these metro areas, or about 30%, even saw double-digit increases, up from 15% of markets in the fourth quarter.
“The worsening inventory crunch through the first three months of the year inflicted even more upward pressure on home prices in a majority of markets,” NAR Chief Economist Lawrence Yun said. “Following the same trend over the last couple of years, a strengthening job market and income gains are not being met by meaningful sales gains because of unrelenting supply and affordability headwinds.”
“Realtors in areas with strong job markets report that consumer frustration is rising,” Yun said. “Home shoppers are increasingly struggling to find an affordable property to buy, and the prevalence of multiple bids is pushing prices further out of reach.”
The total number of existing home sales, including single-family and condos, decreased, falling 1.5% to a seasonally adjusted annual rate of 5.51 million in the first quarter. This is down from 5.59 million sales in the fourth quarter, and down 1.7% from 5.6 million in the first quarter of 2017.
By the end of the quarter, there were just 1.67 million existing homes available for sale. This is down 7.2% from the 1.8 million homes at the end of the first quarter of 2017. The average supply during the first quarter was 3.5 months, down from 3.7 months the year before.
And while the national family median income increased to $74,779 in the first quarter, overall affordability decreased from the year before due to rapidly rising mortgage rates and home prices.
For example, a buyer making a 5% down payment on a home would need an income of $55,732 in the first quarter. A buyer putting 10% down would need an income of $52,779 and one putting 20% down would need an income of $46,932.
“Prospective buyers in many markets are realizing that buying a home is becoming more expensive in 2018,” Yun said. “Rapid price gains and the quick hike in mortgage rates are essentially eliminating any meaningful gains buyers may be seeing from the combination of improving wage growth and larger paychecks following this year’s tax cuts.”
“It’s simple: homebuilders need to start constructing more single-family homes and condominiums to overcome the rampant supply shortages that are hampering affordability,” he said.
The video below shows the five metros with the most expensive median home values in the U.S., as ranked by NAR. Four of the top five markets are located, unsurprisingly, in California.
On the other end of the spectrum, NAR also ranked the five metro areas where median home prices were the cheapest. These metros included Decatur, Illinois, with a median home price of $73,000; Cumberland, Maryland, with $86,200; Youngstown-Warren-Boardman, Ohio, with $91.300; Elmira, New York, with $100,800 and Binghamton, New York, with $103,000.