Falling Rates Helped Drive Home Price Growth in Q4, NAR says

Key Takeaways:

– U.S. home prices increased in 86 percent of metropolitan areas in the fourth quarter
– The median price for single-family homes rose by 3.5 percent from the previous year
– The rise in prices was fueled by a lack of inventory and high demand for homes
– The 30-year fixed mortgage rate fell, contributing to the increase in home prices
– Monthly mortgage payments have doubled in recent years, causing dissatisfaction among homebuyers
– Affordability is a concern, particularly for first-time homebuyers who spend a significant portion of their income on mortgage payments
– Home prices fell in 14 percent of the markets tracked by the National Association of Realtors
– Increased homebuilding and lower mortgage rates are expected to improve housing affordability and increase inventory in 2024

inman:

U.S. home prices shot up in 86 percent of the 221 metropolitan areas tracked by the National Association of Realtors and rose 3.5 percent in the fourth quarter, according to data released Thursday by NAR.

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Home price appreciation accelerated across much of the country in the fourth quarter of last year, according to a quarterly update from the National Association of Realtors released Thursday.

The price for single-family homes rose in 86 percent of the 221 metropolitan areas tracked by NAR. The median price rose 3.5 percent from a year earlier, to $391,700.

The gains marked an acceleration in price growth compared to earlier in 2023, when median prices rose 2.2 percent, and grew in 82 percent of metro areas.

“Homeowners have benefited from housing wealth accumulation,” NAR Chief Economist Lawrence Yun said in a statement. “However, many homebuyers have been shocked at high housing costs, with a typical monthly mortgage payment rising from $1,000 three years ago to more than $2,000 last year,” “This doubling in housing costs for recent home buyers is not included in the official consumer price index inflation calculations and contributes to the sense of dissatisfaction about the economy.”

The rise in prices came as the 30-year fixed mortgage rate fell from an October high of 7.79 percent to 6.61 percent. It was also fueled in part by a lack of inventory, constraining supply amid high demand for homes.

The typical monthly payment for a mortgage on a single-family home rose to $2,163, 10 percent higher than a year earlier but down 1.2 percent from the third quarter, when mortgage rates were climbing toward post-pandemic highs.

The fall of housing affordability is particularly acute for first-time homebuyers, who spent 39.4 percent of their family income on mortgage payments. Households are considered cost-burdened if they spend more than 30 percent of their monthly income on housing, according to the U.S. Department of Housing and Urban Development.

In nearly half of the markets — 47.1 percent — buyers needed $100,000 to afford a 10 percent down payment.

Home prices fell in 14 percent of the 221 markets tracked by NAR.

“Sales were restrained due to limited inventory,” Yun said. “But increased homebuilding, along with lower mortgage rates, will not only improve housing affordability but also help bring more homes onto the market in 2024.”

The figures largely track other reports that show home price appreciation accelerated toward the end of the year. The S&P CoreLogic Case-Schiller Index reported last week that home prices increased 5.1 percent between November 2022 and November 2023, a pick-up from the previous month which saw annual growth of 4.7 percent.

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Property Chomp's Take:

U.S. Home Prices Continue to Rise in 86% of Metropolitan Areas

In a recent report released by the National Association of Realtors (NAR), it was revealed that home prices in the United States increased in 86 percent of the 221 metropolitan areas that were tracked. The data, which covers the fourth quarter, shows that home prices rose by 3.5 percent during this period.

The rise in home prices is indicative of the continued growth of the real estate market across the country. This trend has been observed for quite some time now, with home prices steadily increasing year after year. However, the fourth quarter of last year saw a notable acceleration in price growth compared to earlier in 2023. During that time, median prices rose by 2.2 percent, and growth was seen in 82 percent of the metro areas.

According to Lawrence Yun, the Chief Economist of NAR, homeowners have benefited greatly from the accumulation of housing wealth. However, the high housing costs have come as a shock to many homebuyers. In just three years, the typical monthly mortgage payment has more than doubled, rising from $1,000 to over $2,000. This significant increase in housing costs is not reflected in the official consumer price index inflation calculations, and it has contributed to a sense of dissatisfaction about the economy.

The rise in home prices can be attributed to several factors. Firstly, the fall in mortgage rates played a significant role in driving home price growth. The 30-year fixed mortgage rate dropped from 7.79 percent in October to 6.61 percent. Additionally, the limited inventory of homes for sale has created a supply-demand imbalance, leading to higher prices. This is especially concerning for first-time homebuyers who are now spending 39.4 percent of their family income on mortgage payments.

Despite the challenges faced by homebuyers, there is hope for improvement in the coming year. Yun believes that increased homebuilding, coupled with lower mortgage rates, will not only improve housing affordability but also bring more homes onto the market in 2024.

It is important to note that while home prices rose in the majority of metropolitan areas, there were still some markets where prices fell. In 14 percent of the 221 markets tracked by NAR, home prices experienced a decline.

Overall, the continued rise in home prices across the country highlights the growing demand for housing and the need for more affordable options. As the real estate market evolves, it will be crucial for industry leaders and policymakers to address these challenges and ensure that homeownership remains attainable for all Americans.

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