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Affordability Worsens as Prices and Rates Climb

According to the latest quarterly report from the National Association of Realtors, consumers saw home prices continue to increase in Q4 of 2021, though at a slower pace than Q3. Fewer markets in the last quarter experienced double-digit price gains. While Q3 of 2021 witnessed all regions achieve double-digit price gains, Q4 only saw the South experience double-digit price appreciation, and single-digit price gains in the Northeast, Midwest, and the West. 

NAR found that, out of 183 measured markets, 67% of the metros reached double-digit price appreciation compared to 78% in the prior quarter. Nationally, the median single-family existing-home price rose at a slower rate of 14.6% year-over-year to $361,700, compared to the 15.9% year-over-year pace last quarter.  

"Homebuyers in the last quarter saw little relief as home prices continued to climb, albeit not as fast as earlier in the year," said NAR Chief Economist Lawrence Yun. "The increasing prices are indicative of a seller's market, with an abundance of eager buyers and very limited supply." 

While outrageous housing costs were problematic for the year, affordability worsened in Q4 compared to the prior year. Increasing mortgage rates made navigating the marketplace even more of a challenge. The most expensive markets in Q4 witnessed an influx in price increase, with nine of them reaching double-digit percentages.  

Top 10 most expensive markets were: 

  1. San Jose-Sunnyvale-Santa Clara, California (19.6%) 
  2. San Francisco-Oakland-Hayward, California (14.9%) 
  3. Anaheim-Santa Ana-Irvine, California (23%) 
  4. Urban Honolulu, Hawaii (16.8%) 
  5. San Diego-Carlsbad, California (14.2%) 
  6. Los Angeles-Long Beach-Glendale, California (15.9%) 
  7. Boulder, Colorado (17.2%) 
  8. Seattle-Tacoma-Bellevue, Washington (13.9%)  
  9. Naples-Immokalee-Marco Island, Florida (21.2%) 
  10. Nassau County-Suffolk County, New York (9%) 

Metros in the Sunbelt and Mountain states that topped the list of areas with the highest yearly price gains were: 

  • Punta Gorda, Florida (28.7%) 
  • Ocala, Florida (28.2%) 
  • Austin-Round Rock, Texas (25.8%) 
  • Phoenix-Mesa-Scottsdale, Arizona (25.7%) 
  • Sherman-Denison, Texas (25.1%) 
  • Tucson, Arizona (24.9%) 
  • Las Vegas-Henderson-Paradise, Nevada (24.7%) 
  • Ogden-Clearfield, Utah (24.7%) 
  • Salt Lake City, Utah (24.4%) 
  • Boise City-Nampa, Idaho (24.3%) 

On average, families typically spent 16.9% of their income on mortgage payments, while one year ago families spent 14.7%. In Q4, the average monthly mortgage payment on an existing single-family home, valued at $361,700 with a mortgage rate of 3.13%, rose to $1,240. 

First-time buyers spent an average of 25.6% of their household income on mortgage payments, making a home purchase unaffordable. A mortgage is considered affordable if its payment—principal and interestamounts to 25% or less of a family's income. 

"The strength of price gains are associated with the strength of the local job market, but the escalating prices took a toll on home shoppers, compelling many to come up with extra cash, and forcing others to delay making a purchase altogether," said Yun. "A number of families, especially would-be first-time buyers, are increasingly being forced out of the market, and this is why supply is critical to expanding homeownership opportunity." 

In 20 markets where the median home sales price ranged from $537,400 to $1.675 million, the modern family needed more than $100,000 to afford a 10% down payment mortgage. In markets where the median sales price was at least $267,700 or less, a family needed less than $50,000 to afford a home. In 12 metro areas where the median home sales price was less than $160,000, a family generally needed less than $30,000 to purchase a home.  

Click here to read NAR's latest Quarterly Report.

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport, with more than six years of writing experience. She has served as Editor-in-Chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington. She has covered events such as the Byron Nelson, Pac-12 Conferences, the Women in Dallas Film Festival, to freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, she is an avid jazz lover and reader. She can be reached at demetria.lester@thefivestar.com.
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