By Nicole Friedman
U.S. home prices rose nearly everywhere in the first quarter, a
rapid price appreciation that shows little sign of fading soon with
limited housing inventory and robust demand.
The median sales price for existing single-family homes was
higher in the quarter compared with a year ago for 182 of the 183
metro areas tracked by the National Association of Realtors, the
association said Tuesday. In 89% of those metro areas, median
prices rose by more than 10% from a year earlier.
This week's price data was the latest confirmation that the
pandemic continues to reshape how and where many Americans want to
live. Remote work prompted buyers to seek out more space, while
pandemic-related restrictions made vacation houses more desirable,
real-estate agents say.
The home-sales boom has been unusually widespread, with low
mortgage rates fueling strong buyer interest across the U.S.,
especially for high-end properties.
But first-time buyers in particular have struggled to keep up
with soaring prices, and those with limited budgets are often
losing out to cash buyers. The l ength of time U.S. homeowners stay
put, meanwhile, has been steadily rising. Some have decided not to
move, or they postponed selling due to concerns about letting
buyers into their homes during a pandemic.
The shortage of homes on the market is affecting home shoppers
around the country. The number of active listings on Realtor.com
was down 52% from a year earlier in the week ended May 1. ( News
Corp, parent of The Wall Street Journal, operates Realtor.com.)
"The record-high home prices are happening across nearly all
markets, big and small, even in those metros that have long been
considered off the radar in prior years for many home seekers,"
said Lawrence Yun, NAR's chief economist.
Home sales rose in 2020 to the highest level since 2006. While
they remained strong in the first quarter, economists say the
current housing boom is less risky than the one in the mid-2000s
that ended with a housing-market crash. Borrowers this time are
more financially qualified, and mortgage lenders are maintaining
tighter standards.
Still, brokers have described the current market at times as
frenzied. Many homes receive multiple offers within days. The
typical home that sold in March spent 18 days on the market, the
fastest pace on record, NAR said.
Economists say the pace of price increases is likely to slow
later in the year and next as more people are priced out of the
market, especially if mortgage rates tick higher. Mortgage-finance
company Fannie Mae is forecasting median existing-home prices to
rise 11.5% in 2021, then slow to a 4% rise in 2022.
"With low inventory already impacting the market, added
skyrocketing costs have left many families facing the reality of
being priced out entirely," Mr. Yun said.
Many of the metro areas that posted the strongest price
increases in the first quarter were vacation destinations, as
second-home demand surged during the pandemic and continues to
remain robust. The biggest gainer was Kingston, N.Y., with a 35.5%
median-price increase from a year earlier. Kingston is in New
York's Hudson Valley, where many city dwellers temporarily or
permanently relocated in the past year.
In the Boise, Idaho, metro area, where median home prices surged
32.8%, Julie Cook struggled to find a house within her budget. She
and her mother moved to Boise from Florida in January. Ms. Cook had
looked at house listings before she moved and planned to buy a
house in Boise for under $300,000. But by the time she arrived,
there was little that amount could buy.
Ms. Cook ended up purchasing a townhouse for $325,000 in March.
"It's really not my dream or anything," she said. "But I felt like
I needed to, for mine and my mom's sake, find a place that we could
afford."
Nationwide, the median existing-home sales price rose 16.2% in
the first quarter to $319,200, a record high in data going back to
1989, NAR said.
Prices are rising so rapidly they are outweighing the benefit of
rock-bottom borrowing rates. In the first quarter, the typical
monthly mortgage payment rose to $1,067, from $995 a year earlier,
NAR said, even as mortgage rates declined.
In many metro areas, demand would still exceed the available
supply even if some buyers dropped out, real-estate executives
say.
"Despite an 11% increase in our average sales price over the
last year, demand for our homes has never been higher," said Eric
Lipar, chief executive of home builder LGI Homes Inc., in an
earnings call this month.
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
May 11, 2021 16:55 ET (20:55 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.