US Metros See Major Price Appreciation

An aerial photograph of a residential neighborhood.

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Homeowners may be shocked by what their home is now worth. In the first quarter, 70% of the largest metros in the U.S. posted double-digit price growth in median single-family existing-home sales prices, the National Association of REALTORS® reported Tuesday.

The median sales price of a single-family existing home rose at a faster pace in the first quarter and was at $368,200, a 15.7% increase from a year ago.

With both prices and mortgage rates rising, housing affordability is worsening for home buyers. Monthly mortgage payments on a typical existing single-family home with a 20% down payment rose to $1,383, an increase of $319 or 30% higher than a year ago. Households are spending 18.7% of their income on mortgage payments, up 14.2% from a year ago, NAR reports in its latest quarterly report.

Will High Prices Last?

“Prices throughout the country have surged for the better part of two years, including in the first quarter of 2022,” says Lawrence Yun, NAR’s chief economist. “Given the extremely low inventory, we’re unlikely to see price declines, but appreciation should slow in the coming months.”

The first quarter registered a record low number of homes for sale. But Yun predicts that home prices will moderate as more housing supply is expected to come onto the market this quarter.

He also believes more buyers will get priced out of the market due to the higher mortgage rates. The 30-year fixed-rate mortgage averaged 5.10% last week, up 2.98% from a year ago, Freddie Mac reports.

“I expect more pullback in housing demand as mortgage rates take a heavier toll on affordability,” Yun says. “There are no indications that rates will ease anytime soon.”

Falling Affordability

Declining affordability is particularly problematic for first-time buyers who have no home to leverage in a home sale first, Yun says. Also, Yun says housing will remain challenging for moderate-income buyers as prices and borrowing costs continue to rise.

During the first quarter, the mortgage payment—with a 10% down payment loan for a typical starter home at $313,000—was $1,363, according to NAR data. That marks an increase of $313--or a 30% jump—from a year ago.

Overall, a family needs at least $100,000 to afford a 10% down payment mortgage in 27 markets, up from 20 markets the previous quarter, according to NAR’s research.