Home Prices Increase in 91% of Metro Areas in Second Quarter
Real Estate In-Depth | August 2019
WASHINGTON—Most metro areas saw price gains under marginal inventory growth in the second quarter of 2019, according to the latest quarterly report by the National Association of Realtors released earlier this month.
Single-family median home prices increased year-over-year in 91% of measured markets in the second quarter, with 162 of 178 metropolitan statistical areas showing sales price gains. That is up from the 86% share in the first quarter of 2019. The national median existing single-family home price in the second quarter was $279,600, up 4.3% from the second quarter of 2018 ($268,000).
The metro areas where single-family median home prices declined included the high-cost areas of San Jose-Sunnyvale-Santa Clara, Calif., (-5.3%), San Francisco-Oakland-Hayward, CA, (-1.9%) and Urban Honolulu (-1.2%). Ten metro areas experienced double-digit increases, including the moderate-cost metro areas of Boise City-Nampa, ID; Abilene, TX Columbia, MO.; Burlington-South Burlington, VT and Atlantic City-Hammonton, NJ.
Lawrence Yun, NAR chief economist, said home builders must bring more homes to the market. “New home construction is greatly needed, however home construction fell in the first half of the year,” he said. “This leads to continuing tight inventory conditions, especially at more affordable price points. Home prices are mildly reaccelerating as a result.”
Ninety-three out of 178 metro markets under study have price growth of 5% or better. “Housing unaffordability will hinder sales irrespective of the local job market conditions,” Yun said. “This is evident in the very expensive markets as home prices are either topping off or slightly falling.”
Notable Takeaways from NAR Report
The five most expensive housing markets in the second quarter were the San Jose-Sunnyvale-Santa Clara, CA., metro area, where the median existing single-family price was $1,330,000; San Francisco-Oakland-Hayward, CA, $1,050,000; Anaheim-Santa Ana-Irvine, CA, $835,000; Urban Honolulu, $785,500; and San Diego-Carlsbad, CA, $655,000.
The five lowest-cost metro areas in the second quarter were Decatur, IL., $97,500; Youngstown-Warren-Boardman, OH, $107,400; Cumberland, MD, $117,800; Binghamton, NY, $119,300 and Elmira, NY, $119,400.
In expensive metro areas where the median prices were $500,000 and above, the single-family median prices declined when compared to the levels of one year ago. The most costly area, San Jose-Sunnyvale-Santa Clara, CA., saw a 5.3% drop. Next in line was San Francisco-Oakland-Hayward, CA., whose decline was 1.9%. Homes in Urban Honolulu, dropped by 1.2%, followed by Boulder, CO, which saw a 0.9% slide. Bridgeport-Stamford-Norwalk, CT., recorded single-family housing prices that were slightly down (0.6%) from last year, possibly due to limits on property tax deductions.
In addition, in other expensive metro areas, prices rose, albeit at a lukewarm pace, including in Anaheim-Santa Ana-Irvine, CA, which rose only 0.6%. Home prices in Los Angeles-Long Beach-Glendale, CA, saw a 1.8% gain, while San Diego-Carlsbad, CA, saw a 1.6% price increase.
Second Quarter Affordability Declines
National family median income is estimated to have risen to $78,366 in the second quarter, but greater home price growth contributed to an overall decrease in affordability from last quarter. A buyer making a 5% down payment would need an income of $62,192 to purchase a single-family home at the national median price, while a 10% down payment would necessitate an income of $58,918, and $52,372 would be required for a 20% down payment.
In the most expensive metro areas in the West, families seeking to avoid paying no more than 25% on mortgage payments saw steep requirements for median household income. San Jose home buyers would need $295,832, while buyers in San Francisco would need $233,552.
At the end of 2019’s second quarter, 1.93 million existing homes were available for sale, which is about equal to the total inventory at the end of 2018’s second quarter. Average supply during the second quarter of 2019 was 4.4 months—up from 4.3 months in the second quarter of 2018.
Yun said housing sales should improve, but cautions of greater economic uncertainty. “The exceptionally low mortgage rates will help with housing affordability over the short run. But if the low interest rates are due to weakening economic confidence, as reflected from a correction in the stock market, then the low rates will not help with job growth and will eventually hinder home buying and home construction.”