Each of the 183 metropolitan housing markets tracked by the National Association of Realtors® (NAR) posted a home prices increase during the fourth quarter of last year. Eighty percent or 161 of those markets had double digit appreciation compared to only 115 that saw such gains in Quarter 3.
The national median existing single-family home price rose 14.9 percent on a year-over-year basis, to $315,900 and all four regions were up by double-digits year-over-year. The Northeast led at 20.7 percent, followed by the West at 15.5 percent, the Midwest at 15.1 percent and the South at 14.0 percent.
NAR’s quarterly report on metropolitan level home prices found the largest annual gains in some metro areas that have long been considered depressed. Bridgeport, Connecticut saw prices increase 39.2 percent, Pittsfield Massachusetts posted 32.2 percent growth, and prices in Atlantic City, New Jersey rose 30 percent. Other metro areas with increases of more than 25 percent include Naples and Crestview, Florida; Barnstable, Massachusetts; Boise City, Idaho; Binghamton and Kingston, New York; and Spokane Washington.
NAR said that national destination sites like Atlantic City, Barnstable, and Naples, along with small towns like Binghamton and Kingston that were within driving distance of major cities saw large price increases, indicating the strong demand for vacation homes and affordable homes during the ongoing pandemic.
“The fourth quarter of 2020 presented circumstances ripe for home price increases,” said Lawrence Yun, NAR chief economist. “Mortgage rates reached record lows, thereby driving up the demand, [while] inventory levels also reached record lows, leading to grim inventory conditions of insufficient supply in the fourth quarter.”
“Although tourism took a major hit overall throughout 2020, our data shows that vacation housing still did well in terms of sales,” Yun said. “Many people purchased in these areas because they found themselves with new work-from-home freedoms.”
Eight of the ten metros with the highest median priced homes were in the West and included San Jose, ($1.40 million); San Francisco, ($1.14 million); and Anaheim, ($935,000); Urban Honolulu, ($902,500); San Diego, ($740,000); Los Angeles, ($688,700); Boulder, ($661,300); and Seattle, Wash., ($614,700). The two in the East were Nassau, N.Y. ($591,600); and Boston, ($579,100). Of the ten, all but Boulder had double-digit growth in those median home prices.
While home sellers have benefited from the fourth quarter price increases, Yun says the large shifts in home prices could soon become detrimental to homebuyers. “The average, working family is struggling to contend with home prices that are rising much faster than income,” he said. “This sidelines a consumer from becoming an actual buyer, causing them to miss out on accumulating wealth from homeownership.”
Still, low mortgage rates are helping to keep mortgage payments affordable. With higher home prices, the monthly mortgage payment marginally rose to $1,040 ($1,020 one year ago). The effective 30-year fixed mortgage rate decreased to 2.81 percent in the fourth quarter of 2020 versus 3.76 percent one year ago.
A household needed an income of $49,908 in the fourth quarter to cover a 30-year fixed-rate mortgage with 20 percent down payment affordably, only slightly higher than the $48,960 annual income required a year earlier. In 130 of the 183 metro areas NAR tracked a family needed less than $50,000 to pay their mortgage. However, in seven of the ten most expensive metros, NAR found that a family needed more than $100,000 in income to buy a house. On average, families typically spent 14.8 percent of their income on mortgage payments based on a median family income of $84,313 in the fourth quarter, down 0.1 point from a year earlier.