The third quarter may have marked the end of price surges as increased mortgage rates put a dent in projected property appreciation projections. Read more from NAR’s latest report.
Home prices continued their steady climb during the third quarter of 2018, though this upward trend may finally be coming to an end, according to a quarterly report by the National Association of REALTORS(r). Increases in mortgage rates may have an impact on home price growth – though virtually every major metro saw home prices increase during this time. 46% of NAR-tracked markets even registered double-digit increases!
In the third quarter, the national median price for single-family existing homes rose 8.6% year over year – slower growth than seen in the second quarter when prices surged 14.2% year-on-year. According to NAR Chief Economist Lawrence Yun, further relief can be expected over time as buyers’ capacity continues to impede home price growth; mortgage rates continue their upward march and median income required to purchase typical homes is now $88,300 — almost $40,000 higher than it was prior to pandemic outbreak.
Meanwhile, monthly mortgage payments on an existing single-family home with a 20% down payment increased 50% year over year to reach $1,840 in the third quarter. Furthermore, 30-year fixed-rate mortgage rates now exceed 7% – more than double what they were 12 months prior – prompting house hunters to revisit what their budget allows. A typical family now needs at least $100,000 qualifying income in 59 markets to afford 10% down payments (versus 53 markets during second quarter), whereas families earning under $50,000 qualify in only 17 out of the 50 markets tracked by NAR!
First-time home buyers are struggling with these dynamics. A typical starter home worth $338,700 could have a mortgage payment of around $1,808 with 10% down payment – an increase of nearly $600 year over year compared to their counterparts a year ago. First-time buyers usually spend nearly 38% of their income on housing costs; most financial experts consider households financially burdened when spending over 25%.
Where Prices Are Rising Fast Some of the priciest markets, including San Jose and San Francisco areas in California–where median home prices stand at $1.7 million and $1.3 million respectively–could experience some price cooling in coming months, according to Yun. “More expensive markets on the West Coast will likely experience price declines following years of limited homebuilding activity, while those located further inland might still see gains.” “However, Midwest states with relatively affordable homes prices might still experience growth,” according to him.
NAR’s report revealed that the South saw not only the highest market share for sales of existing single-family homes during the third quarter but also experienced the greatest year-over-year appreciation in the country, with prices increasing 11.9% year over year – this surpassing increases of 8.2% for Northeast, 7.4% in West, and 6.6% for Midwest regions.
