Prices Ramp Up for Single-Family Existing Home Sales

The American dream of homeownership continues to get more expensive. Buyers are paying more for single-family existing houses, according to the latest quarterly report from the National Association of Realtors, with home sales prices climbing in about 70% or 152 of 221 metro areas in this year’s first quarter. About one in 14 markets or 7% posted double-digit annual price appreciation of 18% in the prior quarter.

But because of previously higher prices, the median single-family existing-home price now declined 0.2% to $371,200, from a year ago. The higher interest rates have made the monthly mortgage payment go up to $1,859, which represents a 33.1% increase from a year ago, when buyers put down 20% of the selling price

With 46% of the rising prices, the South experienced the top jump in the first quarter. Price appreciation from year-over-year also rose 1.4%. Prices also rose in the Midwest by 2.9%. They went down in the Northeast and West, however, with declines of 0.1% and 5.3%, respectively. Lawrence Yun, NAR’s Chief Economist, attributes these results to the rising mortgage rates. “Generally speaking, home prices are lower in expensive markets and higher in affordable markets, implying greater mortgage rate sensitivity for high-priced homes,” he said.

Expensive cities experienced bigger declines with San Francisco, San Jose and Reno seeing drops of at least 10% from a year ago. In contrast, prices rose that same percentage in affordable cities such as Milwaukee, Dayton and Oklahoma City. 

Another finding in the NAR report is that home prices declined where they had previously gone up rapidly, according to Yun. “For example, home prices grew an astonishing 67% in three years in Boise City and Austin through 2022. The latest price reductions in these areas have improved housing affordability and led to some buyers returning given the sustained, rapid job creation in their respective markets,” he said. Year-over-year prices in the first quarter declined by 13.5% in Austin and 10.3% in Boise.

Another significant development is the return of multiple offers, which many pundits thought had disappeared or lessened as the pandemic waned and prices seemed to stabilize or drop. The reason is the continued housing shortage. “Due to the intense housing inventory shortage, multiple offers are returning, especially on affordable homes, Price declines could be short-lived,” Yun said.

Proof of that shortage is found in numbers and comparisons in inventory supply. According to the report, inventory in the first quarter averaged 1.63 million listings at any given time, a 40% reduction from the first quarter of 2019, a year before COVID-19 appeared.

Price Increases, Most Expensive Markets

The top 10 metro areas with the largest year-over-year price increases all recorded gains of more than two digits or at least 11.7%. They include Kingsport-Bristol-Bristol, Tenn.-Va. (18.9%); Oshkosh-Neenah, Wis. (16.5%); Warner Robins, Ga. (16.2%); Burlington, N.C. (14.7%); Elmira, N.Y. (14.7%); Oklahoma City, Okla. (14.7%); Milwaukee-Waukesha-West Allis, Wis. (13.7%); Appleton, Wis. (12.4%); Hickory-Lenoir-Morganton, N.C. (12.0%) and Santa Fe, N.M. (11.7%).

California claims the title for having a majority of the top 10 most expensive markets, including San Jose-Sunnyvale-Santa Clara, Calif. ($1,618,400; -13.7%); Anaheim-Santa Ana-Irvine, Calif. ($1,195,500; -5.1%); San Francisco-Oakland-Hayward, Calif. ($1,192,600; -14.5%); Urban Honolulu, Hawaii ($1,029,000; -8.8%); San Diego-Carlsbad, Calif. ($880,000; -2.8%); Salinas, Calif. ($863,900; -6.8%); San Luis Obispo-Paso Robles, Calif. ($850,200; -3.8%); Oxnard-Thousand Oaks-Ventura, Calif. ($844,800; -5.6%); Boulder, Colo. ($836,900; -2.6%); and Naples-Immokalee-Marco Island, Fla. ($777,000; 4.3%).

Not All Markets are Up 

Roughly three in 10 markets (31%; 68 of 221) experienced home price declines in the first quarter. At the same time, housing affordability has improved somewhat. In the first quarter, affordability improved from 2022’s fourth quarter when mortgage rates went above 7%. The monthly mortgage payment last quarter 2023 with a 20% down payment was $1,859, a 5.5% decrease from the fourth quarter 2022 ($1,967) but a jump of 33.1% – or $462 – from a year ago. The decline meant that the average family spent 24.5% of their income on a mortgage payment, slightly less than the 26.2% they paid in the prior quarter. But that amount was still up from the 19.5% of a year ago.

The slight improvement made it a bit easier for first-time homebuyers during the first quarter of this year—if they could find and bid on a house successfully. For a typical starter home valued at $315,500 with a 10% down payment loan, the monthly mortgage payment fell to $1,825, down 5.4% from the previous quarter ($1,930) yet still an increase of almost $450, or 32.5%, from one year ago ($1,377).