Home prices up in most of the country in the fourth quarter
In the fourth quarter of 2023 existing-home sales prices climbed in 189 out of 221 metro areas, 86% of the country. However, the number of metro areas that saw double digit growth was 15%, far from the trends of a few years ago. In the fourth quarter of 2021, for example, 66% of metro areas saw double digit price increases.
Overall, the national median single-family existing-home price grew 3.5% from one year ago to $391,700, according to a report from the National Association of Realtors® (NAR). This was a 2.2% increase from the third quarter of 2023.
This rise in home values is good news for homeowners, but may make it harder for homebuyers to achieve their homeownership dreams. Fortunately, there are many ways to kickstart homeownership, particularly for first-time homebuyers.
"Homeowners have benefited from housing wealth accumulation. However, many homebuyers have been shocked at high housing costs, with a typical monthly mortgage payment rising from $1,000 three years ago to more than $2,000 last year," said NAR Chief Economist Lawrence Yun. "This doubling in housing costs for recent home buyers is not included in the official consumer price index inflation calculations and contributes to the sense of dissatisfaction about the economy."
Consistent gains across the country
While the headline is about the number of metro areas seeing increases, there were just 14% (32 of 221) experiencing price declines in the fourth quarter, down from 17%.
Continuing a trend from the few quarters, the South saw the largest share of home sales, with 45% of all the nation’s home sales happening in that region. Interesting, home prices went up by the smallest percentage in the South. Here’s the regional breakdown:
- Northeast: Up 7.3%
- Midwest: Up 4.7%
- South: Up 3.2%
- West: Up 4.2%
Home prices are affected by the number of homes for sale—fewer homes for sale drives the prices for the available ones up. Lawrence Yun sees help on the way in this area: "Sales were restrained due to limited inventory. But increased homebuilding, along with lower mortgage rates, will not only improve housing affordability but also help bring more homes onto the market in 2024."
Top markets for growth
The markets with largest year-over-year increases are scattered throughout the country, reinforcing how important it is for buyers to work with local experts:
- Dayton, Ohio (19.9%)
- Kingsport-Bristol-Bristol, Tenn.-Va. (19.2%)
- Fond du Lac, Wis. (18.6%)
- Trenton, N.J. (17.3%)
- Salinas, Calif. (17.1%)
- Newark, N.J.-Pa. (16.7%)
- Anniston-Oxford, Ala. (15.7%)
- Bloomington, Ill. (15.4%)
- Johnson City, Tenn. (15.2%)
- Anaheim-Santa Ana-Irvine, Calif. (14.8%)
The most expensive markets in the U.S. are all out West, continuing a long-standing trend. Only one of these markets saw a drop in home price:
- San Jose-Sunnyvale-Santa Clara, Calif. ($1,750,300; 11%)
- Anaheim-Santa Ana-Irvine, Calif. ($1,299,500; 14.8%)
- San Francisco-Oakland-Hayward, Calif. ($1,251,000; 4.3%)
- Urban Honolulu, Hawaii ($1,069,400; -1.9%)
- Salinas, Calif. ($993,900; 17.1%)
- San Diego-Carlsbad, Calif. ($931,600; 8.7%)
- Oxnard-Thousand Oaks-Ventura, Calif. ($916,800; 7.9%)
- San Luis Obispo-Paso Robles, Calif. ($912,100; 5.7%)
- Los Angeles-Long Beach-Glendale, Calif. ($884,400; 6.7%)
- Boulder, Colo. ($849,400; 11.8%)
Affordability trends
Houses became more affordable a bit in the last quarter partly because mortgage rates went down. If you put down 20% of the house price on a typical existing single-family home, the monthly payment for the mortgage was $2,163. That's 1.2% less than Q3. But if we compare it to a year ago, it's $196 more.
On average, families used to spend 26.7% of their money on the mortgage earlier in 2023, but in Q4 it's a little less, 26.1%. However, in the fourth quarter of 2022 it was even less at 24.2%.
Now, if we talk about people trying to buy their first house, it's still a bit hard. For a typical starter home (#332,900) with 10% down, the monthly mortgage payment is $2,120. It's 1.2% less than the third quarter, but compared to a year ago, it's 9.8% more. First-time buyers are spending 39.4% of their money on the mortgage.
These numbers show just how important it is to work with a local lender who’s an expert in your market.