Median home prices in the US see slowest annual growth since 2016

Median home prices in the United States increased by 4.8% year on year in the third quarter of 2018, the slowest annual rate of growth since the second quarter of 2016, the latest data shows.

This took the average median price to $256,000, up 1% quarter on quarter with the slowdown in the rate of home price appreciation taking place nationwide, according to the figures from the homes sales report from ATTOM Data Solutions.

In many local markets the slowdown is a rational response to worsening home affordability which has deteriorated at an accelerated pace this year due to rising mortgage rates, Daren Blomquist, senior vice president at ATTOM Data Solutions said.

‘Markets not experiencing this price appreciation cooldown may have more of an affordability cushion to work with, but some are in danger of overheating if home price gains continue to run hot,’ he added.

The rate of home price growth slowed on an annual basis in 49% or 74 of the 150 metropolitan statistical areas analysed, including Los Angeles, Chicago, Dallas-Fort Worth, Houston and Miami, all of which posted single digit percentage gains in median home prices compared to a year ago.

‘I think the key factor underpinning the decelerating price appreciation is the impact of rising rates on the monthly payment. Absent financing structures that allow a borrower to increase leverage while mitigating an increase in the monthly debt service, buying power is decreasing across the board,’ said Tendayi Kapfidze, chief economist at mortgage marketplace Lending Tree.

However, price growth increased in 51% or 76 of metro areas including San Jose, Las Vegas, Grand Rapids in Michigan, Colorado Springs, Dayton in Ohio, San Francisco and Atlanta, all of which posted double digit percentage gains in median home prices compared to a year ago.

‘Housing affordability is becoming an increasingly big issue, especially in the western U.S. where many markets have not seen adequate new construction, putting substantial upward pricing pressure on resale homes,’ said Matthew Gardner, chief economist with Seattle-based Windermere Real Estate.

He pointed out that price growth in Seattle has slowed to the slowest pace since the fourth quarter of 2014. ‘Home price growth in Seattle is likely to continue to slow there until incomes are able to catch up, even given significant demand from robust employment growth,’ he added.

The report also shows that owners who sold in the third quarter of 2018 sold for an average of $61,232 more than their original purchase price, the highest average home seller price gain since the second quarter of 2007.

The $61,232 average home seller price gain in the third quarter of 2018 represented an average 32.3% return on the original purchase price, up from an average 31.6% in the previous quarter and up from an average 31.4% in the third quarter of 2017, but still below the recent peak of 32.5% in the fourth quarter of 2017.