WASHINGTON – May 14, 2018 – Inventory levels hovering at all-time lows weighed down home sales and fueled faster price appreciation during the first three months of the year, according to the latest quarterly report by the National Association of Realtors®(NAR).
The national median existing single-family home price in the first quarter was $245,500, which is up 5.7 percent from the first quarter of 2017 ($232,200). The median sales price during the fourth quarter of 2017 climbed 5.3 percent from the fourth quarter of 2016.
Single-family home prices last quarter increased in 91 percent of measured markets – 162 out of 178 metropolitan statistical areas (MSAs) – in a year-to-year comparison. In addition, 30 percent of metro areas had a price increase of 10 percent or greater year-to year, and 15 percent had a double-digit price increase quarter-to-quarter.
"The worsening inventory crunch through the first three months of the year inflicted even more upward pressure on home prices in a majority of markets," says Lawrence Yun, NAR chief economist. "Following the same trend over the last couple of years, a strengthening job market and income gains are not being met by meaningful sales gains because of unrelenting supply and affordability headwinds."
Consumers are getting stressed, says Yun, "Realtors in areas with strong job markets report that consumer frustration is rising. Home shoppers are increasingly struggling to find an affordable property to buy, and the prevalence of multiple bids is pushing prices further out of reach."
Total existing-home sales, including single family and condos, decreased 1.5 percent to a seasonally adjusted annual rate of 5.51 million in the first quarter from 5.59 million in the fourth quarter of 2017. Year-to-year, they're 1.7 percent lower.
At the end of the first quarter, 1.67 million existing homes were available for sale – a 7.2 percent drop year-to-year – and the average supply was 3.5 months, a year-to-year drop from 3.7 months in the first quarter of 2017.
On the bright side, the national family median income rose to $74,7794 in the first quarter, but overall affordability decreased from a year ago because of rising mortgage rates and home prices. To purchase a single-family home at the national median price, a buyer making a five percent downpayment would need an income of $55,732; a 10 percent downpayment would require an income of $52,779; and $46,932 would be needed for a 20 percent downpayment.
"Prospective buyers in many markets are realizing that buying a home is becoming more expensive in 2018," says Yun. "Rapid price gains and the quick hike in mortgage rates are essentially eliminating any meaningful gains buyers may be seeing from the combination of improving wage growth and larger paychecks following this year's tax cuts."
Yun offers his solution: "It's simple: Homebuilders need to start constructing more single-family homes and condominiums to overcome the rampant supply shortages that are hampering affordability."
The five most expensive housing markets in the first quarter were the San Jose, California metro area, where the median existing single-family price was $1,373,000; San Francisco-Oakland-Hayward, California, $917,000; Anaheim-Santa Ana-Irvine, California, $810,000; urban Honolulu, $775,500; and San Diego-Carlsbad, $610,000.
The five lowest-cost metro areas in the first quarter were Decatur, Illinois, $73,000; Cumberland, Maryland, $86,200; Youngstown-Warren-Boardman, Ohio, $91,300; Elmira, New York, $100,800; and Binghamton, New York; $103,000.
Metro area condominium and cooperative prices – covering changes in 61 metro areas – showed the national median existing-condo price was $231,700 in the first quarter, up 5.9 percent from the first quarter of 2017 ($218,800). Eighty-five percent of metro areas showed gains in their median condo price from a year ago.
Regional breakdown Total existing-home sales in the Northeast slipped 8.5 percent in the first quarter and are 8.1 percent below the first quarter of 2017. The median existing single-family home price in the Northeast was $267,400 in the first quarter, up 4.6 percent from a year ago.
In the Midwest, existing-home sales fell 6.9 percent in the first quarter and are 1.8 percent below a year ago. The median existing single-family home price in the Midwest grew 5.9 percent to $187,100 in the first quarter from the same quarter a year ago.
Existing-home sales in the South increased 3.7 percent in the first quarter and are 0.7 percent higher than the first quarter of 2017. The median existing single-family home price in the South was $220,400 in the first quarter, 5.5 percent above a year earlier.
In the West, existing-home sales in the first quarter declined 1.1 percent and are 2.2 percent below a year ago. The median existing single-family home price in the West increased 8.2 percent to $371,300 in the first quarter from the first quarter of 2017.