Home prices hit a new record high in the second

Home prices hit a new record high in the second quarter

The median price for existing single-family homes in the second quarter was $413,500 — the first time that quarterly price has ever risen above $400,000, according to the National Association of Realtors’ most recent quarterly report.

Home prices rose 14.2% year over year in the quarter, slightly slower than the 15.4% year over year price increase in the first quarter.

A majority, 80%, of US metro areas saw double-digit home price increases last quarter, or 148 out of 185. That’s up from 70% of cities in the first quarter.

“Home prices have risen at a pace that has far outpaced wage increases, particularly for low- and middle-income workers,” said Lawrence Yun, NAR’s chief economist.

Coupled with rising mortgage rates, which topped 5% in the second quarter, the continued rise in home prices has meant it has become much more difficult to afford a home. Mortgage rates climb back above 5%

The monthly mortgage payment for a typical existing single-family home with a 20% down payment increased 32% sequentially and nearly 50% year-on-year, according to the NAR report.

The monthly mortgage payment for a typical existing single-family home with a 20% down payment rose to $1,841 last quarter, according to the report. That’s an increase of $444 per month over the first quarter and $612 per month year over year.

Families typically spent 24.3% of their income on mortgage payments, up from 18.7% in the previous quarter and 16.9% a year ago. In general, housing is considered “affordable” when a homeowner spends no more than 25% to 30% of gross income on housing expenses.

First-time buyers typically spent 36.8% of their family income on mortgage payments in the second quarter, up from 28.7% in the previous quarter.

For a typical $351,500 starter home with a 10% down payment, the monthly mortgage payment rose to $1,810 — $433 more than in the first quarter and $597 more than a year ago, according to the report .

Cities with the largest price increases

One family had to earn at least $100,000 to afford a 10% down mortgage in 53 US markets, the report said. That’s nearly double the 27 markets that fell into this category in the previous quarter.

There were 23 markets where a family had to make less than $50,000 to afford a home—places like Youngstown, Ohio; Syracuse, New York or Florence, South Carolina. That was a significant drop from 63 stores in the previous quarter.

What's next for the US housing market?

“Local labor market performance and supply availability are the clear differentiators driving local home price growth,” Yun said. “Job growth is positive and should be welcomed, but supply constraints are creating unnecessary barriers to property opportunities.”

The South accounted for 44% of existing single-family home sales in the second quarter and saw the largest price increase at 18.2%. Prices rose 12.7% in the West, 10.1% in the Northeast and 9.7% in the Midwest during the quarter.

The metro area, which includes Fayetteville, Springdale and Rogers, Arkansas, saw the largest price increases in the second quarter, with home prices up 31.9% year over year. Seven of the top 10 cities with the largest annual price increases were in Florida, and all recorded price increases of 25% or more year-over-year, including the Lakeland and Winter Haven areas, up 31.4%; Naples, up 28.9%; Sarasota, up 28.8%; Tampa and St. Petersburg up 28.0%; Cape Coral and Fort Myers up 27.8%; Punta Gorda up 27.4%; and Ocala by 26.7%. Outside of Florida, other cities in the top 10 included Ogden, Utah, up 25.5%, and the Myrtle Beach region of South Carolina, up 28.5%.

Five of the country’s 10 most expensive markets were in California, including San Jose with the median price being $1.9 million, San Francisco $1.55 million, Anaheim $1.3 million, San Diego $965,900 and Los Angeles $825,700.

Other high-priced cities include Honolulu, with an average price of $1.145 million; Boulder, Colorado at $933,400; Naples, Florida at $850,000; Seattle at $818,900; and Boston at $722,200.

While national home prices are not expected to fall, slowing sales in many markets are leading to price falls and a slower rate of price increases, which could bring a small measure of relief to potential buyers, Yun said.

“The recent slump in mortgage rates will bring additional buyers into the market,” he said. “Especially where house prices are still relatively cheap and jobs are being created.”