National Association of Realtors economist Lawrence Yun

WASHINGTON, DC—Available housing supply fell to record lows during the fourth quarter as sales reached their best quarterly pace of the year, while pricing on homes, including for-sale apartments, reached peak levels in more than half the 178 metro areas measured by the National Association of Realtors, the association said Thursday. Eighty-nine percent of these metro areas saw year-over-year price appreciation, according to NAR.

In fact, home-price gains showed little evidence of letting up throughout 2016, says NAR chief economist Lawrence Yun. “Buyer interest stayed elevated in most areas thanks to mortgage rates under 4% for most of the year and the creation of 1.7 million new jobs edging the job market closer to full employment,” he says. At the same time, though, “the inability for supply to catch up with this demand drove prices higher and continued to put a tight affordability squeeze on those trying to reach the market.”

Yun notes that depressed new and existing inventory conditions led to several of the largest metro areas seeing double-digit or high single-digit appreciation, “which has pushed home values to record highs in a slight majority of markets”—52% to be precise. “The exception for the most part is in the Northeast, where price growth is flatter because of healthier supply conditions.”

Although the national family median income rose meaningfully Y-O-Y to $70,831, rising prices and the boost in mortgage rates at the end of the year slightly weakened home affordability compared to the year-ago period. “Even a pick-up in wage growth may be insufficient to compensate the impact of higher mortgage rates and home prices.” Yun says. “Increased homebuilding will be crucial to alleviate supply shortages and stave off the affordability hit.”

The five most expensive housing markets in Q4 were the San Jose metro area, where the median existing single-family price was $1,005,000; followed by San Francisco, $837,500; Anaheim-Santa Ana, CA, $745,200; urban Honolulu, $740,200; and San Diego, $593,000. The five lowest-cost metro areas in the fourth quarter were Youngstown-Warren-Boardman, OH, $87,600; Decatur, IL, $92,400; Cumberland, MD, $94,000; Rockford, IL, $109,500, and Binghamton, NY, $109,700.

Instant Insights /

Affordability Ebbs As Home Prices Hit Peaks

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