Current Trends in the Single-Family Home Market in the USA

Home prices in the United States have been on an upward trajectory for years now, but that growth is starting to show signs of slowing down. According to new data from the National Association of Realtors (NAR), median single-family home prices nationwide increased 4% in the fourth quarter of 2022 compared to a year earlier, reaching $378,700.

While price appreciation on a national scale may still seem robust, a deeper analysis shows a more nuanced picture. When you look at individual metro areas across the country, about 11% of markets — 20 out of 186 — actually experienced declines in median home prices over the past year. This indicates the housing market is becoming more fractured.

Some of the most substantial price drops are occurring in expensive coastal cities that saw values skyrocket earlier in the pandemic. For example, the metro area with the highest median price in the nation — San Jose, California at $1,577,500 — saw prices fall 5.8% from Q4 2021. Nearby San Francisco witnessed an even larger 6.1% annual decline in median prices, which now stand at $1,230,000. Other high-cost cities like Los Angeles, Anaheim and Boulder also recorded modest single-digit price decreases.

In addition to these traditionally pricey markets, some lower-cost areas that became pandemic boomtowns are now seeing pullbacks. Both Boise, Idaho and Austin, Texas experienced huge influxes of new residents during COVID-19, pushing home values up at double-digit rates. But in the fourth quarter, Boise prices fell 3.4% from a year prior while Austin dipped 1.3%.

Despite the cooling in select areas, the market overall still tilts firmly in the seller’s favor. Median prices rose in 166 of 186 metro areas tracked by NAR, or nearly 90% of markets. The reason homes are not experiencing more widespread price declines is because of ultra-low inventory. There is a long-running shortage of homes for sale, especially affordable options. With mortgage rates above 6%, many current homeowners are also hesitant to give up the low rates they locked in previously.

While prices are not dropping substantially yet, the pace of appreciation is slowing nationwide. The 4% annual gain in Q4 2022 represents a cool-down from Q3’s 8.6% growth rate. The frequency of double-digit price jumps has attenuated dramatically as well.

Looking ahead, experts do not foresee substantial price declines on the horizon for most of the country. NAR’s chief economist Lawrence Yun predicts that slowdown in home prices is soon coming and it will be a blessing after huge run-ups. But limited supply means prices are not expected to change in most markets even if sales volumes happen to decrease.

One metric that continues marching higher is monthly mortgage payments. Nationally, the typical monthly payment on a single-family home with 20% down increased 7% from Q3 to $1,969 in Q4. On an annual basis, payments spiked 58%, or $720 more per month. This sharp payment growth reflects the surge in mortgage rates over the past year.

With affordability stretched thinner, first-time homebuyers are particularly feeling the pain. They devoted 39.5% of monthly income to mortgage payments on average, well above the recommended 30% ceiling. Ongoing unaffordability will likely price many prospective buyers out of the market until mortgage rates moderate.

In summary, the latest housing data reveals a complex, fragmented situation. While the market remains largely favorable for sellers, it may be turning for expensive coastal cities. Price drops are materializing in areas that boomed during the pandemic as well. But constrained supply and still-rising mortgage rates mean the national trajectory of appreciation will likely stay positive, though at a more restrained pace.

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