According to the latest quarterly report from the National Association of REALTORS® (NAR®), 91 percent of large metro areas saw an increase in home prices over the past year. Nationally, the median home price now stands at $279,600, a 4.3 percent gain year-over-year. However, NAR also reported that inventory remains low in the most sought-after price ranges, resulting in a 2.2 percent drop in the total number of sales over the past year. According to the report, 1.93 million homes were on the market in the second quarter this year, a 4.4 month supply.
Tight inventory continues to add fuel to asking prices, making it difficult for some buyers to find affordable homes. The latest report notes that the gap is growing between household income and home prices: In the second quarter, household incomes rose to a national median average of $78,366, but houses appreciated even faster, keeping homes out of reach for many buyers despite a steady economy and a drop in lending rates. Unaffordability is beginning to drive prices down in pricier markets such as San Jose (down 5.3 percent), San Francisco (down 1.9 percent), and Honolulu (down 1.2 percent). But the hottest markets—Boise, ID; Burlington, VT; Columbia, MO—are still showing double-digit price appreciation.
The NAR report cites several factors that affect affordability. “New-home construction is greatly needed; however, home construction fell in the first half of the year,” said Lawrence Yun, chief economist at NAR. “This leads to continuing tight inventory conditions, especially at more affordable price points. Home prices are mildly reaccelerating as a result.” Yun also points to other factors that affect the complicated math of real estate investing. “The exceptionally low mortgage rates will help with housing affordability over the short run, but if the low interest rates are due to weakening economic confidence, as reflected from a correction in the stock market, then the low rates will not help with job growth and will eventually hinder homebuying and home construction,” he says