Q1, 2020: 96 percent of metro areas see home price increases
In 2020’s first quarter, median single-family home prices increased year-over-year in 96 percent of metro areas, with sales price gains in 174 of 181 metropolitan areas measured. The national median existing single-family home price was up 7.7 percent from last year at $274,600.
The West and South regions saw particularly high growth, with price increases in the double digits in 46 metros, including Boise City, Idaho (18.1 percent), Eugene, Ore. (14.5 percent) and Colorado Springs, Colo. (14.4 percent).
“The first quarter price jumps mostly reflect conditions prior to the coronavirus outbreak and show the strength of the housing demand prior to the pandemic,” explains NAR’s chief economist, Lawrence Yun. “Even now, due to very limited listings, home prices are showing no signs of buckling.”
Low inventory drives higher sales prices
Median sales prices of existing homes increased by 8 percent in March on a year-over-year basis. Yun points to a lack of inventory with a simultaneous strong desire for housing. “Supply is extremely limited, and there are simply not as many homes for sale to meet the demand among potential buyers,” says Yun. “More supply and more listings are needed to provide a faster recovery for the economy.”
With 1.50 million existing homes available for sale at the end of last quarter, total inventory was 10.2 percent lower than 2019’s first quarter. At the current sales pace, housing inventory totals were equivalent to 3.4 months in March 2020.
Some of the most expensive metro areas saw significant price jumps in Q1, further increasing median sales prices in the West in the following regions:
- San Jose, Calif., $1,350,000—up 10.7% from last year
- San Francisco, Calif., $985,000—up 5.9% from last year
- Anaheim, Calif., $875,000—up 9.4% from last year
- San Diego, Calif., $670,000—up 8.1% from last year
- Boulder, Colo., $622,600—up 3.1% from last year
- Los Angeles, Calif, $592,800—up 8.1% from last year
- Seattle, Wash., $554,400—up 11.5% from last year
“The fast-rising home prices are not healthy, so more homebuilding needs to take place as the economy begins to reopen,” says Yun. “Mortgage rates are at historic lows and those with secure employment will be attracted to the market.”
A few metro areas saw year-over-year price declines, though they were marginal—all under 3 percent.
- Bloomington, Ill., down 1.8% from last year
- Shreveport-Bossier City, La., down 2.1% from last year
- Bowling Green, Ky., down 2.7% from last year
Home prices increase across the regions
Compared to last year, median single-family sales prices were higher across the board.
- Northeast: Up 9.7% from last year
- Midwest: Up 7.5% from last year
- South: Up 7.5% from last year
- West: Up 7.5% from last year
Lower mortgage rates combat higher home prices
2020’s Q1 followed suit from 2019, with lower mortgage rates making homes more affordable. In the first quarter of 2020, the 30-year fixed-rate averaged 3.57 percent, down from last year’s 4.62 percent. With a 20 percent down payment, the average monthly mortgage payment on a 30-year fixed-rate mortgage was $995, down from last year’s average of $1,048.
A mortgage is considered affordable if it accounts for no more than 25 percent of a household income. With that calculation, and assuming a 20 percent down payment, a family needed a $47,760 household income to afford a home in Q1 of 2020 in 135 of the 181 metro areas. Though in the most expensive metro areas, a family needed double that amount—requiring over a $100,000 household income to afford a home.