Home prices coming down 2.4% in Q2—but it depends on where you live
In the second quarter of 2023, existing-home sales prices climbed in 128 out of 221 metro areas, less than the gains in 152 metros last quarter. This seems to suggest that the home price appreciation that we’ve seen over the last few years, fueled by low mortgage rates and low inventory, may be moderating just a bit.
The national average home price actually decreased by 2.4% from Q2 a year ago, according to a report from the National Association of Realtors® (NAR). The national median single-family home price registered at $402,600 from April to June, traditionally an active time for home sales.
"Home sales were down due to higher mortgage rates and limited inventory," said Lawrence Yun, chief economist at NAR. "Affordability challenges are easing due to moderating and, in some cases, falling home prices, while the number of jobs and incomes are increasing."
However, the story of home prices depends a lot on where you live. Yun points out that “just like the weather, large local market variations exist despite the minor change in the national home price."
It was another active quarter of home sales in the South, where 46% of all the nation’s home sales occurred. Despite that, home prices declined—or perhaps those lower prices were what sparked the number of sales. Here’s the regional breakdown:
- Northeast: Up 3.2%
- Midwest: Up 1.4%
- South: Down 2.2%
- West: Down 5.8%
The West, which saw some of the biggest gains in home prices during the pandemic, continues it’s pattern of home prices coming back to earth. For example, prices in the second quarter declined by 19.1% in Austin, 11.3% in San Francisco, 9.6% in Salt Lake City and 7.4% in Las Vegas.
"Interestingly, price declines occurred in some of the fastest job-creating markets," Yun said. "Prices in these areas are trying to land on better fundamentals after several years of skyrocketing increases. In fact, the number of homes receiving multiple offers, alongside continuing job and wage gains, signal price slides may already be a thing of the past."
Reversing the trend of home price increasing in hot markets out West, now the markets with largest year-over-year increases are mainly in the Midwest:
- Fond du Lac, Wis. (25.3%)
- New Bern, N.C. (19.7%)
- Duluth, Minn.-Wis. (14.6%)
- Davenport-Moline-Rock Island, Iowa-Ill. (12.6%)
- Allentown-Bethlehem-Easton, Pa.-N.J. (11.7%)
- Kingsport-Bristol-Bristol, Tenn.-Va. (11.5%)
- Peoria, Ill. (11.5%)
- Green Bay, Wis. (10.9%)
- Trenton, N.J. (10.5%)
- Cape Girardeau, Mo.-Ill. (10.4%)
The most expensive markets in the U.S. remain the usual suspects, though all but one reported in with a negative average price change this quarter:
- San Jose-Sunnyvale-Santa Clara, Calif. ($1,800,000; -5.3%)
- San Francisco-Oakland-Hayward, Calif. ($1,335,000; -11.3%)
- Anaheim-Santa Ana-Irvine, Calif. ($1,250,000; -3.8%)
- Urban Honolulu, Hawaii ($1,060,700; -7.4%)
- San Diego-Carlsbad, Calif. ($942,400; -2.4%)
- Salinas, Calif. ($915,600; 0.6%)
- Oxnard-Thousand Oaks-Ventura, Calif. ($904,900; -2.7%)
- San Luis Obispo-Paso Robles, Calif. ($890,900; -3.2%)
- Boulder, Colo. ($871,200; -6.7%)
- Naples-Immokalee-Marco Island, Fla. ($850,000; unchanged)
Princes increased in about 60% of markets, with 5% of those posting double digit price gains. This is down from 7% of markets posting double-digit gains last quarter. About two in five markets (41%; 90 of 221) experienced home price declines in the second quarter, up from 31% in the first quarter.
Inventory remains a concern
First-time buyers were still facing challenges due to low inventory and prices that were a bit out-of-reach. A typical starter home was valued at around $342,200. To put down a 10% payment, the monthly mortgage bill ended up being about $2,012. That's almost 10% more than the previous quarter's $1,830. And it's over $200 more than last year's payment of $1,807, which is an increase of about 11%.
Those first-time buyers would have to shell out about 40.7% of their family income for mortgage payments, compared to the 37.1% they were paying in the previous quarter.
These numbers are different in every market, obviously. That’s why it’s so important to work with a local lender who’s an expert in your market. That’s one of the best ways to make the most out of your unique situation.
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