Low rates and supply push prices up even in affordable areas, expert says
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Selling prices of US homes shot up for the third month in a row in June as the housing supply dwindled.
Annual home-sale prices grew 3.4% to a median of $321,200, according to Redfin’s latest report. The price growth in June this year was lower than last year’s year-over-year gain of 5.5%.
"As national home price growth stabilizes, we're continuing to see supply and demand dynamics play out differently in affordable inland markets than in expensive coastal markets," said Redfin Chief Economist Daryl Fairweather. “As long as mortgage rates and inventory are low, we'll see more buyers competing for homes and driving up prices in places where they are still relatively affordable. And without more homes to buy, particularly at affordable price points, sales will continue to lag."
Out of 85 metros, only six areas experienced a year-over-year decline in their median sale price. San Jose saw the biggest drop (down 4.9%), followed by Oxnard, Calif. (down 4.8%), Oakland, Calif. (down 2%), Seattle, Wash. (down 0.5%), Lake County, Ill. (down 0.1%), and Los Angeles (down 0.1%).
"In places like Philadelphia and Cleveland, where home prices are growing by double digits and buyers are rate- and price-sensitive, falling mortgage interest rates make buying a home this summer increasingly attractive,” Fairweather said. “But without a commensurate increase in the number of homes for sale, some of the most affordable markets are driving nationwide home prices up. Meanwhile, expensive markets like the Bay Area and Seattle are still feeling a chill with falling prices and many more homes for sale than there were a year ago. Unlike their inland counterparts, buyers in these once-hot West Coast markets are less likely to feel the urgency to buy while rates are low and before prices rise more.”
Although the overall supply of homes increased 0.5% annually, it fell in 48 metros, while the number of homes rose in 37 metros across the US.
Home sales plunged 8% in 80 of the 85 metros Redfin tracked in June. A year ago, sales were up 2.2% month over month. However, Redfin economists said that the drop was primarily because June 2018 had an extra Friday, which is the most common day for home closings. Sales were down 3.5% when adjusted for the number of weekdays.
Even though sales weakened, homes sold off the market as fast as they did the same time last year. Homes went off the market after a median of 35 days.
