Washington, D.C. (CNN) Home prices are rising across the country – overall. Looking at individual markets, however, some show that prices have fallen from a year ago.
Median single-family home prices rose 4% in the fourth quarter from a year ago to $378,700. Prices were highest in the Northeast last quarter, up 5.3%; followed by the South, up 4.9%; the Midwest, up 4% and the West, up 2.6%, according to the National Association of Realtors.
But explore the level of the market and it is clear that prices in some areas are down from the previous year. The positive regional numbers mask the fact that about 11% of individual housing markets tracked by NAR — 20 of 186 cities — saw house prices decline in the fourth quarter of last year.
“A few markets could see double-digit price declines, particularly some of the more expensive parts of the country, which have also seen declining employment and an increase in the number of residents moving to other areas,” said Lawrence Yun, chief economist of NAR.
Almost all of the most expensive places to buy are in the West, and half of the top 10 most expensive cities are in California. Several of these places are seeing prices drop the most.
San Jose, California was the most expensive place to buy a home in the United States in the fourth quarter. But that median price of $1,577,500 is actually down 5.8% from a year ago – and prices there have already fallen 17% from the peak median price of $1,900,000 in second quarter of last year, according to NAR.
San Francisco saw the nation’s largest year-over-year price drop last quarter, with a median price of $1,230,000, down 6.1% from a year ago. a year. San Francisco home prices are already down 21% in the fourth quarter from the median peak price of $1,550,000 in the second quarter.
Among the most expensive cities to see prices fall are Anaheim, California, with a median price of $1,132,000, down 1.6% from a year ago; Los Angeles, with a median price of $829,100, down 1.3%; and Boulder, Colorado, with a median price of $759,500, down 2.0%.
Other places where prices have fallen have seen the steep price increases during the frenetic home buying market in recent years. They also tend to be attractive lifestyle destinations where people moved because remote work offered more flexibility. These include Boise, Idaho, where prices fell 3.4% from a year ago and Austin, Texas, where prices fell 1.3%.
The good news for buyers looking for price relief is that the median price increase of 4% in the fourth quarter is lower than the 8.6% increase in the third quarter. In addition, the price increases are smaller, with far fewer markets seeing double-digit price increases in the fourth quarter.
“A slowdown in home prices is underway and welcome, especially since the price of typical homes has risen 42% over the past three years,” Yun said, noting that these cost increases have far exceeded wage increases and consumer price inflation since 2019.
A fractured market
For much of the pandemic, home prices across the country have moved in one direction: up. Some hotspots like Austin and Boise have seen prices skyrocket. Other regions, particularly in the Midwest, saw prices rise more moderately. Still, as mortgage rates were near all-time lows, buyers moved in droves.
That story changed last year, when mortgage rates soared following the Federal Reserve’s historic campaign to contain inflation. Buying a home fell off a cliff. By the end of 2022, existing home sales were down nearly 18% from 2021 as potential buyers exited the market, according to NAR.
Typically, a drop in buying demand would mean oversupply and ultimately lead to lower prices. But that doesn’t happen, generally speaking, in the housing market.
Instead, single-family home prices climbed in nearly 90% of metropolitan areas tracked by NAR in the fourth quarter: 166 of 186 markets saw prices continue to rise. The national median price of a single-family home rose 4% last quarter from a year ago to $378,700.
How can this be?
A major driver of this is that there is a shortage of inventory due to chronic underconstruction of affordable housing in the United States, as well as homeowners unwilling to part with the ultra-high mortgage rate. low they’ve gotten over the past few years. .
“Even with an expected reduction in home sales this year, prices are expected to remain stable in the vast majority of markets due to extremely limited supply,” Yun said.
There are still places where house prices continue to climb at double digit rates. The top 10 cities with the largest year-over-year price increases all saw gains of at least 14.5%, with seven of those markets in Florida and the Carolinas, according to NAR.
Farmington, New Mexico saw the biggest price increase in the fourth quarter, up 20.3% from a year ago. It was followed by Sarasota, Florida, up 19.5%; Naples, Florida, up 17.2%; Greensboro, North Carolina, up 17.0%; Myrtle Beach, SC, up 16.2%; Oshkosh, Wis., up 16.0%; Winston-Salem, North Carolina, up 15.7%; El Paso, Texas, up 15.2%; Punta Gorda, Florida, up 15.2%; and Daytona Beach, Florida, up 14.5%.
How is affordability changing?
In the last quarter of 2022, a family needed qualifying income of at least $100,000 to afford a 10% down payment mortgage in 71 markets, up from 59 in the previous quarter, according to NAR.
Still, there were 16 markets where a family needed qualifying income below $50,000 to afford a home, though that number was down from 17 in the previous quarter. Some of those included Peoria, Illinois, where a family can qualify for a loan with an income of $33,660; Waterloo, Iowa, with income of $40,639; and Montgomery, Alabama, with income of $48,172.
Nationally, the monthly mortgage payment on a typical existing single-family home with a 20% down payment was $1,969 in the fourth quarter according to NAR. That’s a 7% increase from the third quarter of last year, when the monthly payment was $1,838, but a significant 58% increase – or a monthly increase of $720 – from a year ago. one year old.
This has made the image of affordability even more difficult for many homebuyers. Families typically spent 26.2% of their income on mortgage payments, down from 25% the previous quarter and 17.5% a year ago.
First-time buyers have obviously been pushed to breaking point when it comes to affordability. They typically spent 39.5% of their household income on mortgage payments, down from 37.8% in the previous quarter. A mortgage is considered unaffordable if the monthly payment, including principal and interest, is more than 25% of family income. Generally, a common financial rule is to spend no more than 30% of your income on housing costs.