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Low housing inventory, combined with record low mortgage rates, has spurred an increase in median prices for single-family homes in all but one of 183 metro areas during the second quarter, according to the National Association of Realtors. 

HOME PRICE GAINS MODERATE FOR FIRST TIME IN THE LAST YEAR

The organization's latest quarterly report finds that 94% of 183 metro areas experienced double-digit price increases, up from 89% in the previous quarter.

The median sale price for existing single-family homes rose 22.9% to $357,900, an increase of $66,800 year-over-year. The Northeast led with double-digit year-over-year price growth of 21.8%, followed by the South with 21%, the West with 20.9% and the Midwest with 17.1%.

"Home price gains and the accompanying housing wealth accumulation have been spectacular over the past year, but are unlikely to be repeated in 2022," NAR chief economist Lawrence Yun said in a statement. "There are signs of more supply reaching the market and some tapering of demand. The housing market looks to move from ‘super-hot’ to ‘warm’ with markedly slower price gains."

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Twelve metro areas reported home price gains of over 30% year-over-year, eight of which are in the South and West regions. These include:

  • Pittsfield, Massachusetts (46.5%)
  • Austin-Round Rock, Texas (45.1%)
  • Naples-Immokalee-Marco Island, Florida (41.9%)
  • Boise City-Nampa, Idaho (41%)
  • Barnstable, Massachusetts (37.8%)
  • Boulder, Colorado (37.7%)
  • Bridgeport-Stamford-Norwalk, Connecticut (37.1%)
  • Cape Coral-Fort Myers, Florida (35.6%)
  • Tucson, Arizona (32.6%)
  • New York-Jersey City-White Plains, N.Y.-N.J. (32.5%)
  • San Francisco-Oakland-Hayward, California (31.9%)
  • Punta Gorda, Florida (30.8%)

Over the past three years, the typical price gain on an existing single-family home totaled $89,900, with price gains in all 182 markets. In 46 out of 182 markets, homeowners typically experienced price gains of over $100,000. The markets with the largest price gains include: 

  • San Francisco-Oakland-Hayward, California ($315,000)
  • San Jose-Sunnyvale-Santa Clara, California ($294,000)
  • Anaheim-Santa Ana-Irvine, California ($279,500)
  • Barnstable, Massachusetts ($220,600)
  • Boise-City-Nampa, Idaho ($206,300)

MORTGAGE APPLICATIONS RISE AS FIRST-TIME HOMEBUYERS FIND OPTIONS

As home prices surge, the monthly mortgage payment on an existing single-family home financed with a 30-year fixed-rate loan and 20% down payment rose to $1,215, a year-over-year increase of $196. This comes despite the 30-year fixed mortgage rate decreasing to 3.05%, compared to 3.29% a year ago.

Among all homebuyers, the monthly mortgage payment as a share of the median family income rose to 16.5% in the second quarter of 2021, compared to 14% a year ago. Among first-time buyers, the mortgage payment on a 10% down payment loan jumped to 25% of income, compared to 21.2% a year ago. A mortgage is considered affordable if the payment amounts to no more than 25% of the family’s income.

"Housing affordability for first-time buyers is weakening," Yun noted. "Unfortunately, the benefits of historically-low interest rates are overwhelmed by home prices rising too fast, thereby requiring a higher income in order to become a homeowner."

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In 17 metro areas, the typical family needed to earn more than $100,000 to affordably pay a 10% down payment mortgage, up from 14 metro areas a year ago. These areas include:

  • San Jose-Sunnyvale-Santa Clara, California
  • San Francisco-Oakland-Hawyward, California
  • Anaheim-Santa-Ana-Irvine, California
  • San Diego-Carlsbad, California
  • Los Angeles-Long Beach-Glendale, California
  • Honolulu, Hawaii
  • Boulder, Colorado
  • Denver-Aurora, Colorado
  • Seattle-Tacoma-Bellevue, Washington
  • Naples-Immokalee-Marco Island, Florida
  • Bridgeport-Stamford-Norwalk, Connecticut
  • Nassau, New York
  • New York-Newark-Jersey City
  • Boston, Massachusetts
  • Barnstable, Massachusetts
  • Washington-Arlington-Alexandria
  • Portland-Vancouver-Hillsboro

Families in only 84 metro area needed to earn less than $50,000 to afford a home, down from 104 markets in the previous quarter. The most affordable markets – where a family can typically afford to buy a home financed with a 10% down payment with an income of $25,000 or less – are in the Rust Belt areas of Youngstown-Warren Boardman, Ohio ($24,401); Peoria, Illinois ($24,013); Cumberland, Maryland ($23,773); and Decatur, Illinois ($214,481).

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Going forward, Yun warns that housing supply will be "critical in moderating the growing housing costs and rising rents." 

"Any disincentive to produce more housing inventory, such as extending the eviction moratorium, will only worsen the current shortage," Yun added.

NAR has requested the "expeditious release" of rental subsidy funds in order to assist individuals who may be facing eviction.

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