Despite mortgage rates hovering near 7%, approximately 90% of the top metropolitan real estate markets reported home price gains during the fourth quarter of 2022.
This information comes from the National Association of Realtors (NAR) quarterly report entitled Metropolitan Median Area Prices and Affordability which overall found 166 of the top 186 metropolitan areas posted an average of a 4% price increase.
In addition, 18 of those cities posted double-digit price increases during the fourth quarter, although that number is down 46% from the third quarter of 2022.
Compared to the fourth quarter of 2021, the national median single-family existing-home price rose 4% to $378,700. Year-over-year price appreciation decelerated when compared to the previous quarter’s 8.6%.
On the other hand, 1-in-10 markets—or 11%—reported a decline in home prices during the quarter.
“A slowdown in home prices is underway and welcomed, particularly as the typical home price has risen 42% in the past three years,” NAR Chief Economist Lawrence Yun said, noting these costs increases have far surpassed wage increases and consumer price inflation of 15% and 14%, respectively, since 2019. “Far fewer metro markets experienced double-digit price gains in the latest quarter.”
The top 10 metro areas with the largest year-over-year price increases all recorded gains of at least 14.5%, with seven of those markets in Florida and the Carolinas. Those include Farmington, New Mexico (20.3%); North Port-Sarasota-Bradenton, Florida (19.5%); Naples-Immokalee-Marco Island, Florida (17.2%); Greensboro-High Point, North Carolina (17.0%); Myrtle Beach-Conway-North Myrtle Beach, South/North Carolina (16.2%); Oshkosh-Neenah, Wisconsin (16.0%); Winston-Salem, North Carolina (15.7%); El Paso, Texas (15.2%); Punta Gorda, Florida (15.2%); and Deltona-Daytona Beach-Ormond Beach, Florida (14.5%).
“A few markets may see double-digit price drops, especially some of the more expensive parts of the country which have also seen weaker employment and higher instances of residents moving to other areas,” Yun added.
In the fourth quarter, a standard 30-year fixed-rate mortgage cost $1,969 per month, a 7% increase from the third quarter of 2022 and up 58% from last year. Owners typically spent 26.2% of their income on mortgage payments, up from 25% in the prior quarter and 17.5% one year ago.
Those in the market for a starter home most likely encountered serious affordability challenges during the quarter as a starter home is now averages $321,900 equaling a payment of $1,931 per month—or about 7% more than the third quarter and up 52% from a year ago.
First-time buyers typically spent 39.5% of their family income on mortgage payments, up from 37.8% in the previous quarter. A mortgage is considered traditionally unaffordable if the monthly payment (principal and interest) amounts to more than 25% of the family’s income.
A person needed an income of over $100,000 in 71 markets in order to afford a mortgage and 10% down payment for a home, up from 59 in the third quarter. Yet, a family needed a qualifying income of less than $50,000 to afford a home in 16 markets, down from 17 in the previous quarter.