Q3 home prices: a rare win/win for buyers and homeowners?
Home prices grew in 181 of 185 metro areas across the country in the third quarter of 2022 compared to a year ago, a continuation of a trend of homes gaining value. However, the pace of price appreciation seemed to slow this quarter and was actually down from the second quarter of 2022.
In a report today by the National Association of Realtors® (NAR), national median single-family existing-home price climbed to $398,500—an increase of 8.6% from a year ago. But this was a slowdown of year-over-year price depreciation from last quarter, when home prices grew at a 14.2% pace. Rising mortgage rates are seen as a major reason for this slowdown.
"Much lower buying capacity has slowed home price growth and the trend will continue until mortgage rates stop rising," said Lawrence Yun, NAR Chief Economist. "The median income needed to buy a typical home has risen to $88,300 – that's almost $40,000 more than it was prior to the start of the pandemic, back in 2019."
Why this could be good news for homeowners
Home prices went up in all four regions of the country last quarter, meaning that most owners’ homes are worth more than at this time last year, and therefore they have more equity in them
Median Home Prices, Q3 2022 vs. Q2 2021
- Northeast: up 8.2%
- Midwest: up 6.6%
- South: up 11.9%
- West: up 7.4%
This increase in home value can help current homeowners finance a home renovation project, with home equity lines of credit (HELOC) being a particularly useful tool at this time.
Why this could be good news for buyers
Home prices have been going up and up and up for a while now, but this report suggests that the pace of increases could be slowing. Consider the trend of metro areas seeing double digit price gains year-over-year. It had been steadily going up over the last year, but dropped almost in half this quarter:
- Metro areas seeing double digit price gains:
- Q4 2021: 66%
- Q1 2022: 70%
- Q2 2022: 80%
- Q3 2022: 46%
In Q2, the median single-family existing-home prices rose above $400,000 for the first time, landing at $413,500. This quarter, prices were considerably lower than that at $398,500.
For potential buyers who don’t want to buy a home at the top of the market, this suggests that we may have passed that point. Keep in mind that it is normal for home prices to come down during the fall months and that these trends aren’t uniform across the country.
"The more expensive markets on the West Coast will likely experience some price declines following this rapid price appreciation, which is the result of many years of limited home building," says Yun. "The Midwest, with relatively affordable home prices, will likely continue to see price gains as incomes and rents both rise."
Top 10 most expensive markets in the U.S., with average price change this quarter:
- San Jose-Sunnyvale-Santa Clara, Calif. ($1,688,000; 2.3%)
- San Francisco-Oakland-Hayward, Calif. ($1,300,000; -3.7%)
- Anaheim-Santa Ana-Irvine, Calif. ($1,200,000; 9.1%)
- Urban Honolulu, Hawaii ($1,127,400; 7.6%)
- San Diego-Carlsbad, Calif. ($900,000; 5.9%)
- Los Angeles-Long Beach-Glendale, Calif. ($893,200; 3.8%)
- Boulder, Colo. ($826,900; 7.5%)
- Naples-Immokalee-Marco Island, Fla. ($746,600; 16.7%)
- Seattle-Tacoma-Bellevue, Wash. ($741,300; 4.6%)
- Boston-Cambridge-Newton, Mass.-N.H. ($698,900; 6.2%).
Top 10 metro areas with largest year-over-year price increases:
- North Port-Sarasota-Bradenton, Fla. (23.8%)
- Lakeland-Winter Haven, Fla. (21.2%)
- Myrtle Beach-Conway-North Myrtle Beach, S.C.-N.C. (21.1%)
- Panama City, Fla. (20.5%)
- Deltona-Daytona Beach-Ormond Beach, Fla. (19.6%)
- Port St. Lucie, Fla. (19.4%)
- Greenville-Anderson-Mauldin, S.C. (18.9%)
- Kingsport-Bristol-Bristol, Tenn.-Va. (18.8%)
- Tampa-St. Petersburg-Clearwater, Fla. (18.8%)
- Ocala, Fla. (18.8%)
Rates and affordability still concerning
While it’s possible to see some signs for optimism in this quarter home price report, we still need to keep an eye on the major factors driving the housing market: mortgage rates and home inventory. Together, they are reducing housing affordability for many Americans, who can’t afford the higher monthly payments that are needed today.
The monthly mortgage payment on a typical single-family home with a 20% down payment was $1,840. Thankfully, that’s just a little bit higher than the payment from the second quarter of this year ($1,837). But it’s a huge jump from the average payment of $1,226 of one year ago.
That’s one reason we’re all keeping an eye on mortgage rates, and by extension, what the Federal Reserve does with their federal funds rate, as that indirectly impacts mortgages.