Home prices really ramped up in the
first quarter of 2020
as inventory failed to make significant gains. The
National Association of Realtors® (NAR) said the median single-family home in
the quarter sold at $274,600, a 7.7 percent annual increase. Prices rose in 96 percent
of the 181 metropolitan areas tracked NAR. In the fourth quarter of 2019, 94
percent posted gains.

Forty-six metros, mostly in the West
and South regions, saw prices increase by double-digits. This included Boise
City (18.1 percent), Eugene (14.5 percent), and Colorado Springs (14.4 percent),
among others.

“The first quarter price jumps
mostly reflect conditions prior to the coronavirus outbreak and show the
strength of the housing demand prior to the pandemic,” said Lawrence Yun,
NAR chief economist. “Even now, due to very limited listings, home prices are
showing no signs of buckling.”

In March, the final month of the
quarter and the first month of widespread COVID-19 shutdowns, there was still an
8.0 percent annual price gain.
Yun says the strong desire for housing, paired
with the dire inventory totals contributed to higher home prices. “Supply is
extremely limited, and there are simply not as many homes for sale to meet the
demand among potential buyers,” he said. “More supply and more listings are
needed to provide a faster recovery for the economy.”

At the end of the quarter, 1.50
million existing homes were available for sale, 10.2 percent fewer than the
inventory at the end of 2019’s first quarter. This was estimated at a 3.4-month
supply at the current sales pace.

Even some pricey West Coast
communities
where price increases had flattened or had even begun to decline in
2019 surged again in the first quarter of 2020. These cities notably included
San Jose where prices rose 10.7 percent and Seattle at 11.5 percent.

A
few metros did see small price declines, under 3 percent. These included
Bloomington, Illinois; Shreveport-Bossier, Louisiana; and Bowling Green, Kentucky.

Median single-family sales prices
were higher across all regions compared to one year ago. The Northeast saw a
rise of 9.7 percent, while the Midwest, the South, and the West each had an
individual increase of 7.5 percent.

Despite the steep price increases,
homeownership became more affordable over the last two quarters thanks to lower
interest rates. The 30-year fixed-rate averaged 3.57 percent in the first
quarter of 2020, down from 4.62 percent one year ago. The average monthly
mortgage payment on a 30-year fixed-rate mortgage with a 20 percent down
payment declined from $1,048 a year ago to was $995, equivalent to 15 percent
of the median family income of $79,662. NAR says the rule of thumb for
affordability is spending no more than 25 percent of household income on  a mortgage payment. The income that is needed
for this scenario decreased to $47,760 from $50,304 one
year earlier.

In 135 of the 181 metro areas, a
family needed less than $50,000 to afford a home in Q1,
assuming a 20 percent down payment. However, in the most expensive metro areas,
such as San Jose, San Francisco, and Honolulu a given family needed of $100,000
to over $200,000.

By Jann Swanson , dated 2020-05-12 12:23:50

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Courtesy of Mortgage News Daily