Strong sales and lack of supply kept house prices high in the US throughout 2017
An uptick in existing home sales in the United States in the final three months of 2017 pulled down housing inventory to an all-time low and kept price growth at its recent robust pace, the latest index report shows.
The national median existing single family home price in the fourth quarter was $247,800, up 5.3% from the fourth quarter of 2016, according to the quarterly report from the National Association of Realtors.
The data also shows that single family home prices increased in 92% of markets in the final quarter of 2017 with 162 out of 177 metropolitan statistical areas1 (MSAs) showing sales price gains year on year.
Some six metros , 15%, recorded double digit price increases compared with 11% in the third quarter, and 18 metros eclipsed their previous peak sales price. Overall, home prices are now at their all-time high in 114 or 64% of markets.
Lawrence Yun, NAR chief economist, pointed out that in 2017 prices in most markets climbed steadily due to improving sales and worsening inventory conditions.
‘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,’ he said.
‘Remarkably, home prices have risen a cumulative 48% since 2011, yet during this same timeframe, incomes are up only %. In the West region, where very healthy labour markets are driving demand, the gap is even wider,’ he explained.
‘These consistent, multi-year price gains have certainly been great news for home owners, 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,’ he added.
The report also shows that total existing home sales, including single family and condos, increased 4.3% to a seasonally adjusted annual rate of 5.62 million in the fourth quarter from 5.39 million in the third quarter, and are 1.3% higher than the 5.55 million pace during the fourth quarter of 2016.
At the end of the fourth quarter, there were 1.48 million existing homes available for sale, which was 10.3% below the 1.65 million homes for sale at the end of the fourth quarter in 2016. The average supply during the fourth quarter was 3.5 months, down from 4.2 months in the fourth quarter of 2016.
The national family median income rose to $74,492 in the fourth quarter, but overall affordability still edged downward compared to a year ago because of the combination of rising mortgage rates and home prices.
To purchase a single family home at the national median price, a buyer making a 5% down payment would need an income of $55,585, while a 10% down payment would require an income of $52,659, and $46,808 would be needed for a 20% down payment.
‘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,’ said Yun.
‘In areas where home building 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,’ he added.
The five most expensive housing markets in the fourth quarter were San Jose in California where the median existing single family price was $1,270,000, San Francisco-Oakland-Hayward metro at $920,000, Anaheim-Santa Ana-Irvine metro at $785,000, urban Honolulu at $760,600 and San Diego-Carlsbad at $610,000.
The five lowest cost metro areas in the fourth quarter were Cumberland in Maryland at $84,600, Youngstown-Warren-Boardman in Ohio at $90,200, Decatur in Illinois at $100,000, Binghamton in New York at $108,900 and Wichita Falls in Texas at $110,400.
Total existing home sales in the Northeast jumped 10.1% in the fourth quarter but are 0.4% below the fourth quarter of 2016. The median existing single family home price in the Northeast was $268,100 in the fourth quarter, up 4.2% year on year.
In the Midwest existing home sales rose 6% and are 2.3% up year on year with a median price $193,800, some 7.2% higher year on year while in the South sales were up 3.8% with a median price of $221,600, a rise of 5% on an annual basis.
Sales in the West were unchanged on a quarterly basis but up 0.3% year on year to a median price of $374,400, a rise of 7.2% in the fourth quarter from the fourth quarter of 2016.