Families need a qualifying income of $100,000 to afford houses in nearly half of the metro markets
Home prices in metro areas saw an increase in the third quarter of 2023 with more than 80% of metro markets posting price gains, the National Association of Realtors’ (NAR’s) latest quarterly report showed.
NAR recently released the Metropolitan Median Area Prices and Affordability report for Q3 2023. It found that 182 out of 221 metro markets saw prices rise while the 30-year fixed mortgage rate ranged from 6.81% to 7.31%.
“Homeowners have accumulated sizable wealth, with a typical homeowner gaining more than $100,000 in overall net worth since 2019 and before the height of the pandemic,” said Lawrence Yun, NAR’s chief economist.
“However, the persistent lack of available homes on the market will make the dream of homeownership increasingly difficult for younger adults unless housing supply is significantly boosted,” he added.
What did the report show?
NAR’s report found that 11% of the 221 metropolitan areas had seen price increases reaching double digits, an increase from 5% in the previous quarter.
Year-over-year, the national median single-family existing-home prices increased to 2.2%, reaching $406,900.
The largest share of single-family existing-home sales were in the South region with 46% as its price appreciation reached 1.7% year-over-year. The Northeast saw a 5.3% increase in its home prices while the Midwest and the West had 5.2% and 0.6% respectively.
Some cities saw home price decreases year-over-year with only 17% of the metro markets noting declining prices in Q3. This was a large decrease from 41% in the previous quarter.
The 10 metro areas that had the largest price increases year-over-year were Fond du Lac, Wisconsin (18.9%), Hickory-Lenoir-Morganton, North Carolina (17.1%), Oshkosh-Neenah, Wisconsin (15.2%), Green Bay, Wisconsin (14.8%), Reading, Pennsylvania (14.7%), Newark, New Jersey (14.3%), Dayton, Ohio (13.7%), Fort Wayne, Indiana (12.9%); Farmington, New Mexico (12.7%); and Kankakee, Illinois (12.6%).
With the increase of home prices and mortgage rates, housing affordability worsened in Q3. The monthly mortgage for single-family homes that had a 20% down payment increased by 7% from the previous quarter and by 19.2% year over year. First-time home buyers now typically spent 40.4% of their family income on mortgage payments, up from the 38.2% found in the previous quarter.
Families now needed a qualifying income of at least $100,000 in order to afford a 10% down payment mortgage in 45.7% of the metro markets while families could afford a home in only 2.7% of the markets if they had a qualifying income of $50,000.
“With consumer inflation becoming more manageable, the Federal Reserve needs to consider cutting interest rates,” said Yun.
“In turn, Congress must consider incentives to boost housing supply and inventory so that more Americans can participate in wealth accumulation. The housing market shouldn’t be accessible only to those who are paying in cash nor become a playground for the wealthy,” he added.
NAR’s report detailed statistics about the median home prices in metropolitan areas every quarter.
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