Despite facing the highest mortgage rates seen in two decades, the U.S. housing market exhibits robust price growth across the overwhelming majority of metropolitan areas. In a recent assessment by the National Association of Realtors (NAR), it was reported that in the first quarter of this year, home prices increased in an overwhelming 93% of the 221 analyzed markets. This trend underscores a persistent upward trajectory in national home values, despite economic pressures that have exacerbated housing affordability issues.
However, a closer examination reveals a nuanced picture: a significant minority of markets are experiencing price declines. Specifically, 7% of the markets surveyed showed a reduction in home prices year-over-year. This presents a potential opportunity for aspiring homeowners in select regions where affordability might be within reach.
Among the metropolitan areas with decreasing home prices, Elmira, NY, leads with a dramatic 15.1% drop. Here, the median sale price for a home stands at a notably affordable $70,000. For a buyer with a 20% down payment, an annual income of just $34,400 would suffice to comfortably afford a home, according to NAR data.
Contrastingly, in regions like San Antonio-New Braunfels, Texas, and Cape Coral-Fort Myers, Florida, the home prices are notably higher, although they too are on a downward trajectory. In San Antonio, the median sale price is $269,000, requiring an income of $77,500 for a prospective buyer to manage the 20% down payment scenario. Cape Coral-Fort Myers reports a median home price of $390,000, necessitating an income of $105,200 to afford a home.
The decline in these areas, particularly in states like Florida and Texas, can be attributed to a significant increase in property listings coupled with the ease of building new houses in these regions. According to Glenn Kelman, CEO of Redfin, this trend is expected to persist, particularly in "red states" which facilitate new construction.
While certain local markets see a drop in home prices, the national outlook remains less optimistic for buyers. With national average mortgage rates hovering around 7%, the typical home price in the U.S. has escalated to $389,400, marking a 5% increase compared to last year. This has consequently driven up the monthly mortgage payment by 9.3% from the previous year, now averaging $2,037 for a typical home with a 20% down payment, as noted by the NAR.
Lawrence Yun, NAR's chief economist, remarks on the price resilience, "Astonishingly, greater than 90% of the country's metro areas experienced home price growth despite facing the highest mortgage rates in two decades." He attributes the rising prices to a mismatch between supply and demand, with insufficient housing inventory failing to meet buyer demand.
The cumulative effect of these economic conditions is starkly reflected in the housing market dynamics. As per Kelman's insights, housing mobility is at an all-time low with "four million people projected to move this year, the lowest number seen in many years," primarily due to persistently high interest rates.
Thus, the current landscape of the U.S. housing market presents a dual reality: while most of the country grapples with rising prices and dwindling affordability, certain regions offer a glimmer of hope for those looking to enter the housing market amidst challenging economic conditions.
