According to the final 2023 quarterly report from the National Association of Realtors (NAR), single-family existing-home sales prices climbed 86% in top metropolitan areas (189 of 221) during the fourth quarter of 2023, up from 82% during the third quarter.
This comes as the 30-year fixed mortgage rate dropped from a 7.79% to 6.61% according to Freddie Mac. Fifteen percent of the 221 tracked metro areas experienced double-digit price gains over the same period, up from 11% in the third quarter.
“Homeowners have benefited from housing wealth accumulation. However, many homebuyers have been shocked at high housing costs, with a typical monthly mortgage payment rising from $1,000 three years ago to more than $2,000 last year,” said NAR Chief Economist Lawrence Yun. “This doubling in housing costs for recent home buyers is not included in the official consumer price index inflation calculations and contributes to the sense of dissatisfaction about the economy.”
Compared to one year ago, the national median single-family existing-home price grew 3.5% to $391,700. In the prior quarter, the year-over-year national median price increased 2.2%.
Among the major regions of the country—the West, South, Midwest, and Northeast—the South posted the largest share of single-family existing-home sales (45%) in the fourth quarter, with a year-over-year price appreciation of 3.2%. In the Northeast, prices climbed by 7.3%, 4.7% in the Midwest, and 4.2% in the West.
“Sales were restrained due to limited inventory,” Yun said. “But increased homebuilding, along with lower mortgage rates, will not only improve housing affordability but also help bring more homes onto the market in 2024.”
Housing affordability marginally improved in the fourth quarter on the back of declining mortgage rates. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $2,163, down 1.2% from the third quarter ($2,189) but up 10% – or $196 – from one year ago. Families typically spent 26.1% of their income on mortgage payments, down from 26.7% in the previous quarter but up from 24.2% one year ago.
The lack of available inventory combined with affordability constraints continued to blight first-time buyers during the fourth quarter. For the typical starter home valued at $322,900 (given a 10% down payment), the monthly mortgage payment fell slightly to $2,120, down a smidge by 1.2% from the prior quarter ($2,146). However, that was an increase of $190—or 9.8%— from one year ago when the monthly mortgage payment was $1,930. First-time buyers typically spent 39.4% of their family income on mortgage payments, down from 40.3% in the prior quarter.
A family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 47.1% of markets, up from 45.7% in the previous quarter. Yet, a typical family needed a qualifying income of less than $50,000 to afford a home in 2.3% of markets, down from 2.7% in the prior quarter.
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