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Monday, August 15, 2022
ArlingtonReal EstateFuture of home sales, prices? Jury is still out

Future of home sales, prices? Jury is still out

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The first quarter of 2022 saw more metropolitan areas reach double-digit annual price gains than the previous quarter, according to the National Association of Realtors’ latest quarterly report.

Seventy percent of 185 measured metros, including Washington, experienced such price gains, up from 66 percent in the preceding quarter.

Median single-family existing-home prices were up 15.7 percent from a year before, up to $368,200. In comparison, the year-over-year trajectory in the prior quarter was 14.3 percent.

Notably, the South region made up 45 percent of single-family existing-home sales in the first quarter of 2022, and notched the highest regional price appreciation at 20.1 percent. The Northeast saw a climb of 6.7 percent, the Midwest 8.5 percent and the West 5.9 percent.

The Washington area was at the lower end of the double-digit-increase scale. Its median sales price of $553,000 for the quarter was up 11 percent from a year before.

“Prices throughout the country have surged for the better part of two years, including in the first quarter of 2022,” said Lawrence Yun, NAR’s chief economist. “Given the extremely low inventory, we’re unlikely to see price declines, but appreciation should slow in the coming months.”

Yun noted his prediction is based on an expectation of further supply for the upcoming quarter. He also anticipates other changes.

“I expect more pullback in housing demand as mortgage rates take a heavier toll on affordability,” he added. “There are no indications that rates will ease anytime soon.”

The top 10 areas with the highest year-over-year price gains were made up of midsize and small markets, with half located in Florida. Those top 10 include Punta Gorda, Fla. (34.4%); Ocala, Fla. (33.8%); Ogden-Clearfield, Utah (30.8%); Lakeland-Winter Haven, Fla. (30.1%); Decatur, Ala. (28.9%); Tampa-St. Petersburg-Clearwater (28.8%); Fort Collins, Colo. (28.4%); North Point-Bradenton-Sarasota, Fla. (28%); Myrtle Beach-Conway-North Myrtle Beach, N.C.-S.C. (28%); and Salt Lake City (27.9%).

“Traditionally, homes in these markets were viewed as relatively inexpensive, but with recent migration trends, prices have increased significantly,” Yun said. “As more families relocate to various areas, we may see some surprising markets on our top 10 list.

“Price gains in many smaller, tertiary cities are now outpacing those in the more expensive primary and secondary markets,” he said. “This is due to buyers looking for less expensive housing and also a result of more opportunities to work from home, making relocation to smaller markets possible.”

Half of the nation’s 10 most expensive markets were in California. The top 10 included San Jose-Sunnyvale-Santa Clara ($1,875,000, up 25%); San Francisco-Oakland-Hayward, ($1,380,000; 15%); Anaheim-Santa Ana-Irvine ($1,260,000; 26%); Urban Honolulu ($1,127,900; 19.9%); San Diego-Carlsbad ($905,000; 18.5%); Boulder, Colo. ($859,100; 18.2%); Los Angeles-Long Beach-Glendale ($792,500; 13.1%); Seattle-Tacoma-Bellevue ($746,200; 14.2%); Naples-Immokalee-Marco Island, Fla. ($745,000; 24.3%); and Denver-Aurora-Lakewood ($662,200; 19.4%).

With sustained price appreciation and higher mortgage rates, affordability greatly worsened in the first quarter of 2022. The monthly mortgage payment on a typical existing single-family home with a 20-percent down payment rose to $1,383, which is up $319, or 30 percent, from one year ago.

Families typically spent 18.7 percent of their income on mortgage payments (compared to 14.2% one year ago).

“Declining affordability is always the most problematic to first-time buyers, who have no home to leverage, and it remains challenging for moderate-income potential buyers, as well,” Yun added.

First-time buyers typically spent 28.4 percent of their family income on mortgage payments. A mortgage is considered unaffordable if the monthly payment (principal and interest) amounts to a quarter of the family’s income.

A family needed at least $100,000 in annual earnings to afford a 10-percent down payment mortgage in 27 markets (up from 20 markets in the previous quarter), and a family needed less than $50,000 to afford a home in 63 markets (down from 81 markets).

In Virginia markets outside the Washington area, the median home-sales price in Richmond for the quarter was $354,500 and the median home-sales price in Hampton Roads was $289,900. Each figure was up 9.4 percent from a year before.

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