Home Prices Benefit Owners, Challenge Buyers

CHICAGO —Homeowners continued to see their equity grow in the third quarter, with nearly 90% of major U.S. metro areas posting increases, the National Association of Realtors® reported Thursday. Markets in the Midwest posted some of the largest gains last quarter, with metro areas like Racine, Wis., and Youngstown, Ohio, as well as four markets in Illinois, including Peoria and Springfield, even posting double-digit increases year over year.

A typical homeowner has accumulated $147,000 in housing wealth over the last five years, according to NAR’s newly released third-quarter housing report.

Home prices do appear to be slowing down slightly from their rapid gains in recent years, which could help to improve housing affordability for more home buyers. For example, in the second quarter, the national median home price had climbed nearly 5% year over year compared to 3.1% in the third quarter. The national median price for an existing single-family home was $418,700 in the third quarter, NAR reports. 

Nearly 13% of markets – or 29 out of the 226 that NAR tracks – posted home price declines in the third quarter, up slightly from nearly 10% in the previous quarter.

Nevertheless, “home prices remain on solid ground as reflected by the vast number of markets experiencing gains,” says NAR Chief Economist Lawrence Yun. “Even with the rapid price appreciation over the last few years, the likelihood of a market crash is minimal. Distressed property sales and the number of people defaulting on mortgage payments are both at historic lows.”

Housing affordability improves slightly

Mortgage rates are down considerably from a year ago, when they were pushing above 7%; lately, the 30-year fixed-rate mortgage has averaged in the mid-6% range. So, despite continued increases in home prices, the monthly mortgage payment on a typical existing single-family home, with a 20% down payment, was $2,137 in the third quarter – down 2.4%, or $52, from a year ago, NAR reports.

“Housing affordability has been a challenge, but the worst appears to be over,” Yun says. “Rising wages are outpacing home price increases. Despite some short-term swings, mortgage rates are set to stabilize below last year’s levels. More [housing] inventory is reaching the market and providing additional options for consumers.”

First-time home buyers have notably struggled in the housing market over the past year as they’ve faced higher home prices without the ability to tap into equity from a previous home sale. The market share for first-time buyers has shrunk to record lows, accounting for 24% of home sales (far from the typical 40% market share).

However, first-time buyers may be finding slightly better affordability conditions compared to previous quarters, NAR notes in its latest report. For a home valued at $355,900, with a 10% down payment loan, the monthly mortgage payment fell to $2,097 in the third quarter. That’s down 5.5% from the previous quarter, when it was $2,218.

Still, to succeed in today’s housing market, first-time home buyers are finding they may need more money. First-time buyers typically spent 38% of their family income on mortgage payments compared to other households that tend to devote 25% of their income to mortgage payments.

Top 10 areas for price gains

The 10 markets with the highest price gains all posted double-digit increases last quarter. The following metro areas saw the largest year-over-year median price increases:

• Racine, Wis.: 13.7%
• Youngstown-Warren-Boardman, Ohio-Pa.: 13.1%
• Syracuse, N.Y.: 13%
• Peoria, Ill.: 12.4%
• Springfield, Ill.: 12.3%
• Burlington-South Burlington, Vt.: 11.7%
• Shreveport-Bossier City, La.: 11.5%
• Rockford, Ill.: 11.1%
• Decatur, Ill.: 10.9%
• Norwich-New London, Conn.: 10.6%

The priciest markets in the nation

California, which is home to the most expensive markets in the nation, continues to be the leading state. The following were the most expensive housing markets in the U.S. as of the third quarter, according to NAR:

• San Jose-Sunnyvale-Santa Clara, Calif.: $1.9 million, up 2.7% year-over-year
• Anaheim-Santa Ana-Irvine, Calif.: $1.399 million, up 7.2%
• San Francisco-Oakland-Hayward, Calif.: $1.309 million, up 0.7%
• Honolulu, Hawaii: $1.138 million, up 7.2%
• San Diego-Carlsbad, Calif.: $1.01 million, up 3.2%
• Salinas, Calif.: $959,800, up 1.5%
• San Luis Obispo-Paso Robles, Calif.: $949,800, up 6.7%
• Los Angeles-Long Beach-Glendale, Calif.: $947,500, up 5.6%
• Oxnard-Thousand Oaks-Ventura, Calif.: $947,400, up 2.8%
• Boulder, Colo.: $832,200, down 3%

© 2024 National Association of Realtors® (NAR)