Prices saw double-digit growth in 94% of metro areas in Q2 2021
In the first quarter of 2021, home prices raised in nearly every metro area, and we started our blog article by saying, “The U.S. is living in a hot market; that’s not news.” Well, the situation is still the same, and it only deepened the impact on properties’ market value. In the second quarter of 2021, that growth reached double-digits in 94% of the 183 measured markets.
The number came from the National Association of Realtors (NAR) latest quarterly report. In general, the median sales price of single-family existing homes rose in 99% of measured metro areas in the second quarter, compared to one year ago. Therefore, the trend we saw in the first quarter remains strong. This time, the singularity lies in the double-digit growth since the metro percentage increased from the first quarter (89%).
According to the NAR’s press release, the increase in home prices is due to the fact that “continued low levels of housing inventory, combined with record-low mortgage rates spurring housing demand, have caused an increase in median sales prices.” In the second quarter, the median sales price of single-family existing homes rose 22.9% to $357,900, increasing $66,800 from one year ago. Over three years, 46 markets had price gains of over $100,000.
If we look closely, 12 metro areas reported price gains of over 30% from one year ago. Among them is Austin-Round Rock, Texas, which registered a 45.1% gain, surpassing its first-quarter appreciation.
On the other hand, the situation is not particularly encouraging for first-time buyers. Among them, the mortgage payment on a 10% down payment loan jumped to 25% of income (21.2% one year ago). That’s not good news when we realize a mortgage is affordable if the payment amounts to no more than 25% of the family’s income.
“Housing affordability for first-time buyers is weakening,” explained Lawrence Yun, NAR chief economist. “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.” As a matter of fact, in 17 metro areas, a family needed more than $100,000 to affordably pay a 10% down payment mortgage (in the first quarter, this happened in 14 metro areas). In only 84 of the 183 measured metro areas, a family needed less than $50,000 to afford a home, down from 104 markets in 2021 Q1.
However, Yun remained positive and observed that, although home price gains have been spectacular over the past year, they’re unlikely to be repeated in 2022. “There are signs of more supply reaching the market and some tapering of demand,” he continued. “The housing market looks to move from ‘super-hot’ to ‘warm’ with markedly slower price gains,” he concluded.
Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is designed to be legal or financial advice.