Home Prices Have Surged 42 Percent in the Last Three Years
A slowdown is now underway, says NAR Chief Economist Lawrence Yun. But don’t expect to see dramatic price drops. After three years of runaway home prices, buyers may soon find relief. In some markets, they may have already found it.
The National Association of Realtors latest housing report shows that home price growth is cooling, although that doesn’t mean prices are falling. The national median price for a single-family existing home rose four percent in the fourth quarter of 2022, reaching $378,700. That’s a much slower pace than the 8.6 percent increase in the previous quarter. Further, only 18 percent of metro markets posted double-digit price gains in the fourth quarter of 2022, compared to 46 percent in the previous quarter, NAR data show.
A slowdown in home prices is underway and welcomed, particularly as the typical home price has risen 42 percent in the past three years. Still, even with a projected reduction in home sales this year, prices are expected to remain stable in the vast majority of markets due to extremely limited supply. Moreover, there are signs that buyers are returning as mortgage rates remain steady, even with inventory levels at historic lows, according to an NRA spokesperson.
About one in 10 markets saw home price declines in the fourth quarter of 2022. What’s more, a few markets may see double-digit price drops, especially some of the more expensive parts of the country, which have also seen weaker employment and higher instances of residents moving to other areas.
Home buyers may be holding out for bigger price drops. Rising home prices have far surpassed median wage increases, and higher inflation and mortgage rates also are hampering home affordability. The typical monthly mortgage payment on an existing single-family home with a 20 percent down payment reached $1,969 in the fourth quarter of 2022, a 58 percent increase compared to a year earlier. That said, mortgage rates have been inching upward this year.
The south had the largest share of single-family existing-home sales of any U.S. region and posted year-over-year price appreciation of about five percent. Prices climbed 5.3 percent in the Northeast, four percent in the Midwest, and 2.6 percent in the West during the fourth quarter of 2022. The 10 priciest markets in the fourth quarter of 2022 were mostly in California, with Boulder, Colorado ranking eighth at $759,500, down two percent.