Home Prices Hit Peak Across the Nation

Housing inventory dropped to record lows, pushing prices to peak levels across the country, according to a report from the National Association of Realtors (NAR) released today.

The NAR’s quarterly Metropolitan Median Area Prices and Affordability Report for Q4 2016 revealed that sales prices in more than 50 percent of all measured markets are now either at or higher than their previous peaks.

Year over year, the median price for an existing single-family home rose in 89 percent of the NAR’s measured markets. Over the quarter, 87 percent of metros saw prices gains, with 31 markets seeing double-digit increases.

"Depressed new and existing inventory conditions led to several of the largest metro areas seeing near or above double-digit appreciation,” NAR Chief Economist Lawrence Yun said, “which has pushed home values to record highs in a slight majority of markets. The exception, for the most part, is in the Northeast, where price growth is flatter because of healthier supply conditions."

As of the end for Q4 2016, the median home price was $235,000—up nearly 6 percent from one year before—and inventory was 6.3 percent lower than 2015’s numbers. Only 1.65 million homes (a supply of 3.9 months) were for sale by the end of December.

But despite low inventory and rising prices, affordable mortgage rates helped to ensure buyer interest throughout 2016, according to Yun.

"Buyer interest stayed elevated in most areas thanks to mortgage rates under 4 percent for most of the year and the creation of 1.7 million new jobs edging the job market closer to full employment," Yun said. "At the same time, 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."

Though the market conditions aren’t the same as last year, the threat of rising interest rates may help history repeat itself—at least in the early months of 2017.

"The prospect of higher mortgage rates and more home shoppers in coming months should be enough of an incentive for those serious about buying to start their search now,” said NAR President William E. Brown. "There are fewer listings on the market, but also a little less competition than what's expected this spring. Buyers may find just the home they're looking for at a good price and without the possibility of having to outbid others."

But a first-quarter surge won’t ensure a healthy market all year long. Growth in incomes and construction will be vital as 2017 goes on.

"Even a pick-up in wage growth may be insufficient to compensate the impact of higher mortgage rates and home prices,” Yun said. “Increased homebuilding will be crucial to alleviate supply shortages and stave off the affordability hit.”

To view the full report, visit NAR.com. The next report will be released May 15.