Supply shortages drive unprecedented price gains despite high mortgage rates
Home prices rose in more than 90% of metropolitan areas across the United States in the first quarter of 2024, driven by a critical lack of housing supply failing to meet buyer demand.
According to the National Association of Realtors (NAR), 205 out of 221 metro areas (93%) saw price gains from a year earlier, with 30% of those metros experiencing double-digit price gains. This happened even as mortgage rates remained elevated, ranging from 6.6% to 6.94% for a 30-year fixed loan during Q1.
“Astonishingly, greater than 90% of the country’s metro areas experienced home price growth despite facing the highest mortgage rates in two decades,” NAR chief economist Lawrence Yun said in the report. “In the current market, rising prices are the direct result of insufficient housing supply not meeting the full demand.”
Nationally, the median existing single-family home price climbed 5% year-over-year to $389,400 in the first quarter. In the previous quarter, the yearly median price increase was just 3.4%.
Among the major regions, the South saw the largest share of existing home sales at 46% and a 3.3% annual price appreciation. The Northeast experienced 11% price growth, while prices swelled 7.4% in the Midwest and 7.3% in the West.
The top 10 metro areas with the biggest year-over-year median price hikes all registered gains of at least 18.2%, according to Yun. Six were in Illinois and Wisconsin, led by Fond du Lac at 23.7% and Kankakee at 22%.
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“The expensive markets in the West, where home prices declined last year, are roaring back,” Yun said. “Price dips in that region were viewed as second-chance opportunities by many buyers.”
Eight of the 10 most expensive housing markets were in California, topped by San Jose at a median of $1.84 million (up 13.7% from a year earlier). Other pricey markets included Anaheim, San Francisco, Honolulu, San Diego, and Los Angeles.
While home prices surged, housing affordability did improve slightly in Q1 as mortgage rates ticked lower. The typical monthly mortgage payment was $2,037, down 5.7% from Q4 2023 but still up 9.3% annually.
First-time buyers remained hard-pressed, requiring a median $1,998 monthly payment for a typical starter home purchased with 10% down. That took 36.5% of their family income for mortgage costs alone.
A qualifying income over $100,000 was needed to afford a 10% down payment mortgage in 40.7% of metro areas in the first quarter.
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