The first quarter of 2022 saw more markets reach double-digit annual price gains than the previous quarter, according to the National Association of Realtors‘ latest quarterly report. Seventy percent of 185 measured metros experienced such price gains, up from 66% in the preceding quarter.
These increases come as median single-family existing-home prices rose at a faster rate nationally – 15.7% – from one year ago, up to $368,200. In comparison, the year-over-year pace in the prior quarter was 14.3%. Notably, the South region made up 45% of single-family existing-home sales in the first quarter and notched a double-digit price appreciation of 20.1%. Meanwhile, the Northeast saw a climb of 6.7%, the Midwest 8.5%, and the West 5.9%.1
“Prices throughout the country have surged for the better part of two years, including in the first quarter of 2022,” says Lawrence Yun, NAR’s chief economist. “Given the extremely low inventory, we’re unlikely to see price declines, but appreciation should slow in the coming months.”
Yun notes his prediction is based on an expectation of further supply for the upcoming quarter, citing that the beginning of the first quarter registered a record-low amount of inventory. He also anticipates other changes.
“I expect more pullback in housing demand as mortgage rates take a heavier toll on affordability,” he adds. “There are no indications that rates will ease anytime soon.”
The top 10 areas with the highest year-over-year price gains were made up of midsize and small markets, with half of the sites located in Florida. Those include Punta Gorda, Fla. (34.4%); Ocala, Fla. (33.8%); Ogden-Clearfield, Utah (30.8%); Lakeland-Winter Haven, Fla. (30.1%); Decatur, Ala. (28.9%); Tampa-St. Petersburg-Clearwater, Fla. (28.8%); Fort Collins, Colo. (28.4%); North Point-Bradenton-Sarasota, Fla. (28.0%); Myrtle Beach-Conway-North Myrtle Beach, N.C.-S.C. (28.0%); and Salt Lake City, Utah (27.9%).
“Traditionally, homes in these markets were viewed as relatively inexpensive, but with recent migration trends, prices have increased significantly,” Yun continues. “As more families relocate to various areas, we may see some surprising markets on our top 10 list. Price gains in many smaller, tertiary cities are now outpacing those in the more expensive primary and secondary markets. This is due to buyers looking for less expensive housing and also a result of more opportunities to work from home, making relocation to smaller markets possible.”
Half of the nation’s top 10 most expensive markets were in California, including San Jose-Sunnyvale-Sta. Clara, Calif. ($1,875,000; 25%); San Francisco-Oakland-Hayward, Calif. ($1,380,000; 15%); Anaheim-Sta. Ana-Irvine, Calif. ($1,260,000; 26%); Urban Honolulu, Hawaii ($1,127,900; 19.9%); San Diego-Carlsbad, Calif. ($905,000; 18.5%); Boulder, Colo. ($859,100; 18.2%); Los Angeles-Long Beach-Glendale, Calif. ($792,500; 13.1%); Seattle-Tacoma-Bellevue, Wash. ($746,200; 14.2%); Naples-Immokalee-Marco Island, Fla. ($745,000; 24.3%); and Denver-Aurora-Lakewood, Colo. ($662,200; 19.4%).
With sustained price appreciation and higher mortgage rates, affordability greatly worsened in the first quarter of 2022. The monthly mortgage payment on a typical existing single-family home with a 20% down payment rose to $1,383, which is up $319, or 30%, from one year ago. Families typically spent 18.7% of their income on mortgage payments (14.2% one year ago).
“Declining affordability is always the most problematic to first-time buyers, who have no home to leverage, and it remains challenging for moderate-income potential buyers, as well,” Yun mentions.
During the first quarter, a home purchase was seen as unaffordable for a first-time buyer intending to purchase a typical home. The mortgage payment on a 10% down payment loan on a typical starter home valued at $313,000 rose to $1,363. That is an increase of $313 from one year ago or 30% from one year ago. First-time buyers typically spent 28.4% of their family income on mortgage payments, thus making a home purchase unaffordable. A mortgage is considered unaffordable if the monthly payment (principal and interest) amounts to over 25% of the family’s income.
A family needed at least $100,000 to afford a 10% down payment mortgage in 27 markets (up from just 20 markets in the previous quarter). However, a family needed less than $50,000 to afford a home in 63 markets (81 markets in the prior quarter).