U.S. home prices rose in a majority of markets during the first quarter of the year, with around one in 14 markets seeing a double-digit increase in prices.
Single-family existing-home sales prices rose in 152 of the 221 tracked markets in Q1, 2023, according to a May 9 press release by the National Association of Realtors (NAR). The top 10 metros with the biggest year-over-year price gains recorded at least 11.7 percent in price appreciation. Three of these markets were in Wisconsin while two were in North Carolina. Among the top 10 most expensive markets, seven were in California. Seven percent of the 221 markets saw double-digit price increases.
Region-wise, Midwest saw prices rise by 2.9 percent and the South saw prices appreciate by 1.4 percent year-over-year. In the West, home prices fell by 5.3 percent while the Northeast registered a 0.1 percent decline.
“Generally speaking, home prices are lower in expensive markets and higher in affordable markets, implying greater mortgage rate sensitivity for high-priced homes,” said NAR Chief Economist Lawrence Yun.
In the first quarter this year, inventory averaged 1.63 million listings, which is a 40 percent reduction from Q1, 2019. “Due to the intense housing inventory shortage, multiple offers are returning, especially on affordable homes,” Yun said. “Price declines could be short-lived.”
According to Nadia Evangelou, senior economist and director of real estate research at NAR, home prices won’t drop this year. She expects prices to remain relatively flat.
“Prices will remain fairly steady—and in a lot of markets, that’s a price that is 40 percent or more higher than pre-pandemic,” said Greg McBride, Bankrate chief financial analyst, according to a May 4 Bankrate post.
“If inflation pressures ease and we see a meaningful pullback in mortgage rates, this will ease some of the strain on buyers—but only a bit.”
Home Affordability
Home affordability continued to remain a major issue in Q1, 2023. A typical single-family home with a 20 percent downpayment had a monthly mortgage payment of $1,859, which is 33.1 percent higher compared to a year prior, according to the May 9 NAR press release.
“Families typically spent 24.5 percent of their income on mortgage payments, down from 26.2 percent in the previous quarter but up from 19.5 percent one year ago,” the release said.
“A family needed a qualifying income of at least $100,000 to afford a 10 percent down payment mortgage in 33 percent of markets.”
A U.S. Home Affordability Report issued by ATTOM, a curator of real estate data, shows that median-priced single-family homes and condos were less affordable in the first quarter of this year compared to the historical averages in 94 percent of American counties.
This is a big jump compared to last year. In the first quarter of 2022, only 62 percent of counties had homes that were less affordable than the historical averages.
Inventory Shortage
The increase in home prices over the last few years have been partly fueled due to a shortage of homes available for sale.
According to Rick Sharga, founder and CEO of real estate consulting firm CJ Patrick Company, before the 2008 housing crash, the inventory peaked at around 13 months worth of supply, which was twice what is usually seen in a healthy market.
“Today, we have about a three-month supply, which is about half of what we need,” he said, according to Bankrate.
“Current homeowners are unlikely to trade in their 3 percent mortgage for a new home with a 7 percent loan unless they absolutely have to, so existing home inventory should remain low. And we are not likely to see a huge boost in supply from new construction anytime soon, either.”
According to an April 19 press release, Jennifer Bowers, a Redfin real estate agent in Nashville, pointed out that one of her sellers received multiple offers on their home but pulled the listing off the market when they discovered that they would have to pay higher interest rates.
