The National Association of Realtors (NAR) reports that  record-low mortgage rates and a lack of housing inventory have contributed to increased median single-family home prices. In fact, 65% of metros witnessed double-digit price growth within the last 12 months.
NAR last week released its third-quarter report for 2020. It revealed that single-family home prices have risen in all major metropolitan areas in the last three months.
That means of the 181 metropolitan statistical areas tracked by NAR, every single one showed climbing home values. In 65% of those areas, values increased in double digits, a significant jump in a short period of time.
This creates a problem for first-time homebuyers. Even with historically low mortgage rates, home values are much too high for most to consider buying.
"Favorable mortgage rates will continue to bring fresh buyers to the market," said Lawrence Yun, NAR chief economist. "However, the affordability situation will not improve even with low interest rates because housing prices are increasing much too fast.”
Of the four major regions, all saw double-digit increases over the last 12 months, averaging 12% nationwide. That brings the average single-family home price to $313,500. In opposition, the average medium family income only increased 2.9%, meaning home prices have increased nearly four times faster than incomes.
Families need roughly $50,819 in order to afford a mortgage comfortably this quarter, which is an increase of $1,907 since Q2. The increase since this time last year is $1,283. To consider a home affordable, 25 percent or less of a family’s income should go towards a mortgage, but that’s after putting 20% down on a 30-year mortgage. A family making the median income or higher, $81,477, should be okay.
In eight metro areas, mostly on the west coast, a family needed over $100,000 annual income to even consider purchasing a home. Families making less than $50,000 annually can afford homes in 125 metro areas.
"As home prices increase both too quickly and too significantly, first-time buyers will increasingly face difficulty in coming up with a down payment," said Yun. "Transforming raw land into developable lots and new supply are clearly needed to help tame the home price growth.”
People are looking for more space in light of the pandemic, according to the report, which has also contributed to the metro home price jumps.