Home prices across the nation continued to defy reason as they sharply headed up—even as the turmoil over a hotly contested presidential election, the coronavirus pandemic, and high unemployment persisted.
Unlike during the Great Recession, the median price for single-family homes zoomed up in the third quarter compared with the same period the previous year in every U.S. metro, according to a recent National Association of Realtors® report. Prices rose 12% year over year nationally as folks waged bidding wars over a historically low number of properties on the market. Many buyers sought out larger properties to work from home, educate their children, and maintain social distance from others.
“It’s unbelievable. It’s a record number of metro areas showing double-digit price gains,” says Gay Cororaton, senior economist with the NAR. “We have never seen this widespread price growth.”
The report looked at existing homes in 181 metropolitan areas, which include the main city and surrounding suburbs, towns, and smaller urban areas. New-home prices were not included.
Those prices increased by double digits in roughly two-thirds, or 65%, of those metros. Even the cold weather couldn’t dampen the hot housing market as the median home price remained at $350,000 in October, according to the most recent realtor.com® data.
That’s unwelcome news for many buyers who were anticipating another housing meltdown marked by rock-bottom prices. But unlike the last fiscal crisis, when there were many more homes for sale than qualified buyers, the reverse is true this time around.
The nation is in the clutches of a significant housing shortage at the same time that buyers are clamoring for spacious abodes. Just 1.47 million homes were for sale in the third quarter—about 19.2% lower than last year, according to the report.
“Favorable mortgage rates will continue to bring fresh buyers to the market,” NAR’s Chief Economist Lawrence Yun said in a statement. “However, the affordability situation will not improve even with low interest rates because housing prices are increasing much too fast.”
Even with record-low mortgage rates, monthly housing payments rose across the country. They reached a median $1,059 on a typical single-family home, according to the report. Homeowners needed an income of at least $50,819 to afford the monthly payment.
(Mortgage interest rates were an average of just 2.84% for a 30-year fixed-rate loan as of Thursday, according to Freddie Mac.)
The largest price hikes were in the western region of the country, where they went up 13.7% in the third quarter compared with the previous year. Prices were up 13.3% in the Northeast, 11.4% in the South, and 11.1% in the Midwest.
“The West has one of the tightest numbers of homes for sale,” says Cororaton. “Buyers have to compete against other buyers. Homes are selling quickly. That’s pulling up prices.”
On a metro level, Bridgeport, CT, had the biggest jump: The median price shot up 27.3% in the third quarter compared with a year ago. The metro is a suburb of mostly single-family homes near New York City. Crestview, FL, about an hour east of Pensacola, was next, with a 27.1% rise, followed by Pittsfield, MA, at 26.9%; Kingston, NY, a popular upstate destination for folks leaving New York City, at 21.5%; and Atlantic City, NJ, at 21.5%.
“In light of the pandemic, prices jumped in a number of metros that contain larger properties and open space—where families could find extra rooms, including areas for an at-home office,” Yun said.