Despite mortgage rate increases, home prices rose 2.2% in Q3
In the third quarter of 2023, a time noted for its increase in mortgage rates to the highs not seen in the last decade, existing-home sales prices climbed in 182 out of 221 metro areas, greater than the gains in metros the last two quarters. The national median single-family existing-home price grew 2.2% from one year ago to $406,900, according to a report from the National Association of Realtors® (NAR).
This is greater than the average home price during Q2, which is traditionally a more active time for homebuying demand and when home prices reach their peak during the year.
"Homeowners have accumulated sizable wealth, with a typical homeowner gaining more than $100,000 in overall net worth since 2019 and before the height of the pandemic," said NAR Chief Economist Lawrence Yun. "However, the persistent lack of available homes on the market will make the dream of homeownership increasingly difficult for younger adults unless housing supply is significantly boosted."
Growth across the country
In addition to the more than 80% of metros that witnessed price increases, 11% of metro areas saw double digit price growth, This is up from just 5% in the prior quarter. Conversely, just 17% of metros (38 of 221) experienced home price declines in the third quarter, down from 41%.
Just like Q2, the South saw the largest share of home sales, with 46% of all the nation’s home sales happening in that region. Home prices went up just a bit in that region, falling well behind the price appreciation in Northern states. Here’s the regional breakdown:
- Northeast: Up 5.3%
- Midwest: Up 5.2%
- South: Up 1.7%
- West: Up 0.6%
"Following the big price changes during the last several years, it's natural to witness momentary swings in prices," Yun said. "Some markets that experienced sizable home price gains since 2020 have turned lower, resulting in temporary relief for prospective home buyers. Also, a few markets in the West that experienced price declines in the prior quarter have seen prices rise again."
Top markets
Continuing the trend of home price increasing in the Midwest from last quarter, six of the markets with largest year-over-year increases find themselves in the middle of the country:
- Fond du Lac, Wis. (18.9%)
- Hickory-Lenoir-Morganton, N.C. (17.1%)
- Oshkosh-Neenah, Wis. (15.2%)
- Green Bay, Wis. (14.8%)
- Reading, Pa. (14.7%)
- Newark, N.J.-Pa. (14.3%)
- Dayton, Ohio (13.7%)
- Fort Wayne, Ind. (12.9%)
- Farmington, N.M. (12.7%)
- Kankakee, Ill. (12.6%).
The most expensive markets in the U.S. are all out West. This quarter saw price gains in 8 out of 10 of these markets, a dramatic surge from last quarter when the top ten all saw home price drops:
- San Jose-Sunnyvale-Santa Clara, Calif. ($1,850,000; 9.6%)
- Anaheim-Santa Ana-Irvine, Calif. ($1,305,000; 8.7%)
- San Francisco-Oakland-Hayward, Calif. ($1,300,000; 1.6%)
- Urban Honolulu, Hawaii ($1,061,900; -5.8%)
- San Diego-Carlsbad, Calif. ($978,500; 8.7%)
- Salinas, Calif. ($945,300; 5.3%)
- Oxnard-Thousand Oaks-Ventura, Calif. ($921,500; 3.8%)
- Los Angeles-Long Beach-Glendale, Calif. ($897,600; 1.4%)
- San Luis Obispo-Paso Robles, Calif. ($889,900; 1.7%)
- Boulder, Colo. ($857,800; 3.7%)
Eyes turning to Washington
Home prices are driven in large part by housing inventory and mortgage rates. Both of those indicators are challenging for the average homebuyer right now, making this a difficult market, particularly for a first-time homebuyer.
Yun is encouraging lawmakers and policymakers in the nation’s capital to take steps to improve this situation. "With consumer inflation becoming more manageable, the Federal Reserve needs to consider cutting interest rates. In turn, Congress must consider incentives to boost housing supply and inventory so that more Americans can participate in wealth accumulation. The housing market shouldn't be accessible only to those who are paying in cash nor become a playground for the wealthy."
These numbers show just how important it is to work with a local lender who’s an expert in your market.