Home price growth was strong in the second quarter of 2020, according to the National Association of REALTORS® (NAR) latest quarterly report.
Year-over-year, 96 percent of the measured markets experienced increases in median single-family home prices—the same number of metro areas that saw price gains in the first quarter. On a national level, the median existing single-family home price in Q2 was $291,300—a 4.2 percent increase YoY. However, price appreciation is happening at a slower rate compared to pre-pandemic levels of 7.7 percent in the first quarter.
"Home prices have held up well, largely due to the combination of very strong demand for housing and a limited supply of homes for sale," said Lawrence Yun, NAR chief economist. "Historically-low inventory continues to reinforce and even increase prices in some areas."
Which areas experienced the biggest price growth? San Jose, Calif. ranked at the top once again as the most expensive metro area in the U.S., experiencing price gains of 3.8 percent YoY with a median price of $1.38 million. Next was San Francisco, Calif., which had an unchanged median price of $1.05 million, followed by Anaheim, Calif. with a 2.9 percent increase to $859,000. Also noteworthy, Urban Honolulu, Hawaii saw a 3.8 percent jump to $815,7000 and San Diego, Calif. saw a price growth of 2.3 percent to $670,000.
"Unless an increasing number of new homes are constructed, some buyers could miss out on the opportunity to purchase a home or have the opportunity delayed," he said. "In the meantime, prices show no sign of decreasing."
The following metro areas had median home prices below $200,000: Topeka, Ka. ($147,800); Springfield, Ill. ($153,800); Shreveport, La. ($162,300); Cleveland, Ohio ($177,300); and Columbia, S.C. ($199,100).
"This last quarter showed heavy buyer activity in less occupied areas when compared to highly populated cities such as San Francisco, New York and Washington, D.C., related in part to the longer shutdowns in these cities," said Yun. "In the midst of the pandemic, some buyers are looking for housing in less crowded and more affordable metros."
A nationwide inventory shortage has been pushing prices higher. At the end of Q2, 1.57 million existing homes were available for sale—18.2 percent lower than the total inventory YoY. At the end of June, housing inventory was at 4.0 months.
Despite a lack of homes on the market, properties are moving at a fast pace as buyers are incentivized by low mortgage rates. In the second quarter, the 30-year fixed rate mortgage averaged 3.29 percent—down from 4.08 percent at the same time last year, and down from 3.57 percent in the first quarter of 2020.
These low mortgage rates are helping with affordability. According to NAR, a household with a median family income of $82,471 spent 14.8 percent of its income on mortgage payments—less than the fraction of income spent on housing in the previous quarter (15.1 percent) and a year ago (16.4 percent)
"Although housing prices have consistently moved higher, when the favorable mortgage rates are factored in, an overall home purchase was more affordable in 2020's second quarter compared to one year ago," said Yun.
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