Home prices continued to rise during the second quarter of the year, although at a slower pace than before the advent of the pandemic. The National Association of Realtors® (NAR) said its quarterly survey of metropolitan areas found that single-family home prices rose on an annual basis in 96 percent or 174 of the 181 markets it covers.
Prices increased in 96 percent of the markets in the first quarter of the year as well. However, in those pre-coronavirus days the gain was 7.7 percent year-over-year. In the second quarter, prices were up 4.2 percent to a national median of $291,300.
"Home prices have held up well, largely due to the combination of very strong demand for housing and a limited supply of homes for sale," said Lawrence Yun, NAR chief economist. "Historically-low inventory continues to reinforce and even increase prices in some areas."
There were some standout increases, some in places that don't normally score big gains. Fifteen areas appreciated by double digits including Huntsville, up 13.5 percent; Memphis, 13.4 percent; and Boise (12.6 percent.)
Yun said the low mortgage rates are attracting buyers but again stressed the need for more inventory. "Unless an increasing number of new homes are constructed, some buyers could miss out on the opportunity to purchase a home or have the opportunity delayed," he said. "In the meantime, prices show no sign of decreasing."
San Jose maintained its place as the most expensive metropolitan area in the country during the second quarter at a median price of $1.38 million, a 3.8 percent gain. San Francisco, Calif. was second place at $1.05 million although that price was unchanged from a year earlier. Anaheim, Urban Honolulu, and San Diego rounded out the top five.
"This last quarter showed heavy buyer activity in less occupied areas when compared to highly populated cities such as San Francisco, New York, and Washington, D.C., related in part to the longer shutdowns in these cities," said Yun. "In the midst of the pandemic, some buyers are looking for housing in less crowded and more affordable metros."
Among lower priced cities - about a third of the areas had median prices below $200,000 - were Topeka, Springfield, Illinois; Shreveport, Cleveland, and Columbia, South Carolina.
As Yun noted, home prices have been rising due to the low number of homes for sale. At the end of the second quarter, 1.57 million existing homes were available for sale, 18.2 percent fewer than the total at the end of 2019's second quarter. As of June 2020, housing inventory totals were equivalent to 4.0 months at the current sales pace.
The monthly mortgage payment on a typical home purchase that is financed with a 30-year fixed-rate mortgage and a 20 percent down payment rose slightly to $1,019 compared to $995 in the first quarter. However, this total is still below the level seen one year ago, $1,078.
"Although housing prices have consistently moved higher, when the favorable mortgage rates are factored in, an overall home purchase was more affordable in 2020's second quarter compared to one year ago," said Yun.
A household with a median family income of $82,471 spent 14.8 percent of its income on mortgage payments. This is down from the 15.1 percent required in the first quarter and the 16.4 percent in the second quarter of 2019. Housing expenses are considered a cost burden if they consume more than 30 percent of income.