Medium-sized and small-sized markets drove year-over-year house prices higher in the first quarter
According to the latest quarterly report from the National Association of Realtors, the first quarter of 2022 found more markets hitting double-digit annual price gains compared to the previous quarter. Meanwhile, around 70% of the 185 metros measured saw such price gains, up from 66% in the fourth quarter of 2021.
The increases come as median prices for existing single-family homes rose at a faster pace nationally, rising nearly 16% a year ago to $368,200. By comparison, the year-over-year pace in the prior quarter was 14.3%. The South region accounted for 45% of existing single-family home sales in the first quarter and saw double-digit price appreciation of 20.1%. The Northeast saw only a 6.7% increase, the Midwest increased to 8.5%, and the West increased to around 6%.
“Prices nationwide have surged for the better part of two years, including the first quarter of 2022,” said NAR chief economist Lawrence Yun. “Given the extremely low inventory, prices are unlikely to decline, but appreciation is expected to slow in the coming months.”
Yun hints that his prediction is based on an expectation of additional supply for the next quarter, citing that the start of the first quarter saw an all-time high in inventory.
“I expect more decline in housing demand as mortgage rates weigh more heavily on affordability,” Yun said. “There is no indication that rates will ease anytime soon.”
The top 10 areas with the highest year-over-year price gains were made up of mid-sized and small-sized markets, including:
- Punta Gorda, Florida (34.4%)
- Ocala, Florida (33.8%)
- Ogden-Clearfield, Utah (30.8%)
- Lakeland-Winter Haven, Florida (30.1%)
- Decatur, Alabama (28.9%)
- Tampa-St. Petersburg-Clearwater, Florida (28.8%)
- Fort Collins, Colorado (28.4%)
- North Point-Bradenton-Sarasota, Florida (28.0%)
- Myrtle Beach-Conway-North Myrtle Beach, NC-SC (28.0%)
- Salt Lake City, Utah (27.9%)
“Traditionally, houses in these markets were considered relatively cheap, but with recent migration trends, prices have increased significantly,” Yun said. “As more and more families move to various regions, we could see some surprising markets on our top 10 list. Price gains in many smaller tertiary towns now exceed those in more expensive primary and secondary markets. This is due to buyers seeking less expensive housing and also the result of more opportunities to work from home, making relocation to smaller markets possible.”
The 10 most expensive markets were in California, including:
- San Jose-Sunnyvale-Sta. Clara, California ($1,875,000; 25%)
- San Francisco-Oakland-Hayward, CA ($1,380,000; 15%)
- Anaheim-St. Ana-Irvine, Calif. ($1,260,000; 26%)
- Urban Honolulu, Hawaii ($1,127,900; 19.9%)
- San Diego-Carlsbad, Calif. ($905,000; 18.5%)
- Boulder, Colorado ($859,100; 18.2%)
- Los Angeles-Long Beach-Glendale, CA ($792,500; 13.1%)
- Seattle-Tacoma-Bellevue, Wash. ($746,200; 14.2%)
- Naples-Immokalee-Marco Island, Fla. ($745,000; 24.3%)
- Denver-Aurora-Lakewood, Colorado ($662,200; 19.4%)
With sustained price appreciation and higher mortgage rates, affordability deteriorated significantly in the first quarter of 2022. The monthly mortgage payment on a typical existing single-family home with a 20% down payment rose to $1,383, up 30% from a year ago. Families typically spent nearly 20% of their income on mortgage payments, up from 14.2% a year ago.
“The decline in affordability is still the most problematic for first-time buyers, who don’t have a home to fall back on, and it also remains a challenge for mid-income prospective buyers,” Yun said.
During the first quarter, buying a home was considered unaffordable for a first-time buyer intending to purchase a typical home. The mortgage payment on a 10% down payment on a typical first home worth $313,000 has increased to $1,363. That’s a 30% increase from a year ago.
First-time home buyers typically spent 28.4% of their household income on mortgage payments, making buying a home unaffordable. A mortgage is considered unaffordable if the monthly payment – principal and interest – is more than 25% of family income.
A family needed at least $100,000 to afford a 10% down payment mortgage in 27 markets, up from just 20 markets in Q4 2021. However, a family needed less than $50,000 to afford a home in 63 markets, compared to 81 markets in the previous period. trimester.
To read the full report, click here.