WASHINGTON – Median single-family home prices rose year-over-year in 96% of measured markets in the second quarter (2Q) of 2020, according to the latest quarterly report by the National Association of Realtors® (NAR). Out of 181 metropolitan statistical areas, 174 saw sales price gains – the same number as in the first quarter of 2020.

The national median existing single-family home price in 2Q was $291,300, a 4.2% year-to-year increase. However, it’s still a slower pace of appreciation compared to the pre-pandemic rate of 7.7% in the first quarter.

“Home prices have held up well, largely due to the combination of very strong demand for housing and a limited supply of homes for sale,” says Lawrence Yun, NAR chief economist. “Historically-low inventory continues to reinforce and even increase prices in some areas.”

Fifteen metro areas experienced double-digit price growth, including Huntsville, Ala. (13.5%); Memphis, Tenn. (13.4%); Boise, Idaho (12.6%); Spokane-Spokane Valley, Wash. (11.8%), Indianapolis, Ind. (10.8%), and Phoenix, Ariz. (10.2%).

Yun says that record-low mortgage rates will undoubtedly continue to attract new buyers, but more homes are needed.

“Unless an increasing number of new homes are constructed, some buyers could miss out on the opportunity to purchase a home or have the opportunity delayed,” Yun says. “In the meantime, prices show no sign of decreasing.”

San Jose, Calif. maintained its place as the most expensive metropolitan area in the country during 2Q and showed price gains from one year ago ($1.38 million; 3.8%). Neighboring San Francisco, Calif. was second place at $1.05 million (price unchanged), followed by Anaheim, Calif. ($859,000; 2.9%), Urban Honolulu, Hawaii ($815,700, 3.8%) and San Diego, Calif. ($670,000; 2.3%).

“This last quarter showed heavy buyer activity in less occupied areas when compared to highly populated cities such as San Francisco, New York and Washington, D.C., related in part to the longer shutdowns in these cities,” says Yun. “In the midst of the pandemic, some buyers are looking for housing in less crowded and more affordable metros.”

In about a third of NAR’s measured metro areas, the median home prices were below $200,000. This includes Topeka, Kan. ($147,800), Springfield, Ill. ($153,800), Shreveport, La. ($162,300), Cleveland, Ohio ($177,300), and Columbia, S.C. ($199,100).

At the end of the second quarter, the U.S. had 1.57 million existing homes were available – 18.2% less than total inventory one year earlier. In June 2020, housing inventory totals were equivalent to 4.0 months at the current sales pace. Economists generally consider six months of inventory to be a balanced market between buyers and sellers.

The effective 30-year fixed mortgage rate averaged 3.29% in the second quarter of 2020, down from one year ago (4.08%) and from the first quarter of 2020 (3.57%). It has recently dropped below 3%.

The monthly mortgage payment on a typical home purchase (financed with a 30-year fixed-rate mortgage and a 20% down payment) rose slightly to $1,019 compared to $995 in the first quarter of 2020. However, the total is still below the level seen one year ago, $1,078.

“Although housing prices have consistently moved higher, when the favorable mortgage rates are factored in, an overall home purchase was more affordable in 2020’s second quarter” than it was one year earlier, says Yun.

A household with a median family income of $82,471 spent 14.8% of its income on mortgage payments. That’s less than the fraction of income spent on housing in the prior quarter (15.1%) and one year earlier (16.4%). Housing expenses are considered a cost burden if they consume more than 30% of income.

In a scenario where families spent no more than 25% of income on mortgage payments – assuming they had a 30-year fixed-rate mortgage and 20% down payment – the median family income needed to pay for that mortgage would have been $48,912.

In 130 of the 181 metro areas, a family needed less than $50,000 to afford a home in the second quarter of 2020, assuming a 20% down payment. However, in the most expensive metro areas, a family needed more than $100,000 to afford a home.

SOURCE: By Kerry Smith © 2020 Florida Realtors®

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