Housing supply reached a record low in the United States at the end of 2016 as the best quarterly sales of the year caused price growth to speed up, the latest index shows.
Overall prices in over half of the markets measured by the National Association of Realtor’s index were at or above their previous peak level.
The median existing family home price increased in 89% of measured markets, with 158 out of 178 metropolitan statistical areas showing sales price gains in the fourth quarter of 2016 compared with the fourth quarter of 2015 while 20 areas recorded lower median prices from a year earlier.
There were more rising markets in the fourth quarter compared to the third quarter of 2016, when price gains were recorded in 87% of metro areas while 31 metro areas recorded double digit increases, an increase from 14% in the third quarter.
For all of 2016, an average of 87% of measured markets saw increasing home prices, up from 86% in 2015 and 75% in 2014. Of the 150 markets NAR has tracked since 2005 some 72% now have a median sales price at or above their previous all-time high.
Indeed, throughout 2016 home price growth showed little evidence of slowing. ‘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,’ said Lawrence Yun, NAR chief economist.
‘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,’ he added.
Yun explained that 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. However there was an exception 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 of 2016 was $235,000, up 5.7% from the fourth quarter of 2015 and at the end of the fourth quarter there were 1.65 million existing homes available for sale, 6.3% below the end of the fourth quarter in 2015 and the lowest level since NAR began tracking the supply of all housing types in 1999.
According to NAR president William Brown, prospective buyers will likely see competition in their market increase even more this spring. ‘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,’ he said.
‘There are fewer listings on the market, but also a little less competition than what’s expected this spring. Buyers may find just the home they’re looking for at a good price and without the possibility of having to outbid others,’ he added.
A breakdown of the figures show that total existing home sales increased by 3.3 and are 7.1% higher than the fourth quarter of 2015.
Total existing home sales in the Northeast increased by 10.5% in the fourth quarter and are now 6.4% above the fourth quarter of 2015. The median existing single family home price in the Northeast was $254,100 in the fourth quarter, slightly lower by 0.2% from a year ago.
In the Midwest, existing home sales climbed 2.3% in the fourth quarter and are 8.8% above a year ago. The median existing single-family home price in the Midwest increased 5.7% to $181,100 in the fourth quarter from the same quarter a year ago.
Existing home sales in the South increased 2.6% in the fourth quarter and are 5.4% higher than the fourth quarter of 2015. The median existing single family home price in the South was $210,500 in the fourth quarter, up 7.9% from a year earlier.
In the West, existing home sales rose 1.6% in the fourth quarter and are 9.1% above a year ago. The median existing single family home price in the West increased 7.8% to $348,800 in the fourth quarter from the fourth quarter of 2015.