Q2 Report: Median home prices continue to outpace last year’s figures in 99% of key metro markets
Given the continuing inventory shortage throughout the housing market and the presence of near record-low mortgage rates, it should come as little surprise that home prices continued their meteoric rise in the second quarter of 2021. In fact, all but one of 183 measured markets registered an increase in median home sales price from a year ago, according to the National Association of Realtors®' (NAR) quarterly report.
With demand showing no signs of diminishing, 94% of these same metro areas experienced double-digit growth from Q2 2020, an improvement upon the already robust price increases we witnessed in the first quarter of this year. Several of these metro areas didn't just report double-digit growth, but gains in excess of 30% from a year ago. This surge was led by:
- Pittsfield, Mass: 46.5%
- Austin-Round Rock, Texas: 45.1%
- Naples-Immokalee-Marco Island, Fla: 41.9%
- Boise City-Nampa: Idaho 41%
- Barnstable, Mass: 37.8%
Prices also increased sharply in the San Francisco and New York metro areas.
The median (price) is the message
Median sales price of a single-family dwelling rose 22.9% to $357,900, which is an increase of over $66,00 from last year. The year-over-year numbers were especially impressive when viewed through a regional lens, with double-digit growth seen in all regions when compared to last year.
- Northeast: up 21.8%
- South: up 21.0%
- West: up 20.9%
- Midwest: up 17.1%
The housing market can’t stay hot forever
With market forces continuing to flex their muscles to the benefit of home sales figures everywhere, you might think this trend shows no signs of abatement. But that isn’t necessarily true.
According to NAR chief economist Lawrence Yun, “Home price gains and the accompanying housing wealth accumulation have been spectacular over the past year, but are unlikely to be repeated in 2022."
The housing market won’t exactly be “cooling off,” but there are factors on the horizon that are likely to affect home prices. “There are signs of more supply reaching the market and some tapering of demand," Yun continued. "The housing market looks to move from 'super-hot' to 'warm' with markedly slower price gains."
Mortgage payments on the rise despite low rates
With home prices rising, monthly mortgage payments are also on the rise. The monthly payment on an existing single-family home financed with a 30-year fixed-rate loan and 20% down payment rose to $1,215—an increase of $196 from one year ago. That’s despite the effective mortgage rate decreasing to 3.05% from 3.29% in 2020.*
Among all homebuyers in the second quarter, mortgage payments as a share of median family income rose 16.5% compared with a 14% share from a year ago. Meanwhile, first-time homebuyers with a 10% down payment experienced a jump to 25% of overall income being used for housing; that’s an increase from 21.2% seen last year. According to industry experts, a mortgage remains affordable as long as no more than 25% of household income is being utilized.
As Yun explained, "Housing affordability for first-time buyers is weakening. Unfortunately, the benefits of historically-low interest rates are overwhelmed by home prices rising too fast, thereby requiring a higher income in order to become a homeowner."
*Aggregated data provided by National Association of Realtors and is not an advertised loan scenario.