Every one of the 181 metropolitan statistical areas tracked by the National Association of Realtors reported year-over-year home price gains during the third quarter of 2020, according to NAR’s quarterly Metro Home Price Report.
NAR attributes these strong gains to record-low interest rates and strained housing inventory nationwide. "Favorable mortgage rates will continue to bring fresh buyers to the market," says Lawrence Yun, NAR’s chief economist. "However, the affordability situation will not improve even with low interest rates because housing prices are increasing much too fast."
Sixty-five percent of these metros, or 117 out of 181 areas, reported double-digit YOY price growth, compared with 15 out of 181 metros in the first quarter of 2020. Bridgeport, Connecticut, saw the strongest price growth at 27.3%, followed by Crestview, Florida, at 27.1% and Pittsfield, Massachusetts, at 26.9%.
The national median existing single-family home price rose 12% YOY, up to $313,500. All four major regions experienced double-digit price gains, led by the West at 13.7% and followed by the Northeast at 13.4%, the South at 11.4%, and the Midwest at 11.1%.
"In light of the pandemic, prices jumped in a number of metros that contain larger properties and open space—where families could find extra rooms, including areas for an at-home office," says Yun.
At the end of the third quarter, 1.47 million existing homes were available for sale, down 19.2% from total inventory one year ago. This is equivalent to 2.7 months of supply at the current sales pace. Given home price growth, the monthly mortgage payment on a typical existing single-family home has risen to $1,059, up from $1,019 in the second quarter and $1,032 in Q3 2019.
At this rate, home price have grown four times as fast as the median family income, which rose 2.9% YOY up to $81,477 in Q3 2020. Families need roughly $50,819 in annual income to afford a mortgage on a typical existing single-family home, up from $48,912 in the second quarter.
In 125 out of 181 metro areas, families need less than $50,000 to afford a home. In eight metros, a family would need more than $100,000: San Jose-Sunnyvale, California; San Francisco; Anaheim, California; Urban Honolulu, Hawaii; San Diego; Los Angeles; Boulder, Colorado; and Seattle.
"As home prices increase both too quickly and too significantly, first-time buyers will increasingly face difficulty in coming up with a down payment," Yun says. "Transforming raw land into developable lots and new supply are clearly needed to help tame the home price growth."