Almost 90% of metros experience double-digit price gains in Q4: NAR
The fourth quarter of 2020 saw widespread year-over-year home price growth across all metro areas analyzed by the National Association of Realtors (NAR), according to the association’s latest report released on Thursday.
Home price growth wasn’t just modest either — in a whopping 88 percent of metros (a total of 161 areas) price gains were in the double digits, a substantial jump from the mere 115 metro areas that saw the same degree of price gains in the third quarter.
“The fourth quarter of 2020 presented circumstances ripe for home price increases,” NAR Chief Economist Lawrence Yun said in a statement.“Mortgage rates reached record lows, thereby driving up the demand. At the same time, inventory levels also reached record lows, leading to grim inventory conditions of insufficient supply in the fourth quarter.”
Smaller Northeastern markets within driving distance of major cities largely saw the greatest price gains, indicating a buyer preference for smaller vacation markets with access to the outdoors during continued remote work policies. Bridgeport, Connecticut, led the way in price growth with an increase of 39.2 percent, followed by Pittsfield, Massachusetts (32.2 percent); Atlantic City, New Jersey (30 percent); Naples, Florida (29.9 percent); Barnstable, Massachusetts (28.9 percent); Crestview, Florida (28.6 percent); Boise City, Idaho (27.1 percent); Binghamton, New York (24.4 percent); Kingston, New York (24.2 percent); and Spokane, Washington (23.6 percent).
“Although tourism took a major hit overall throughout 2020, our data shows that vacation housing still did well in terms of sales,” Yun said in NAR’s report. “Many people purchased in these areas because they found themselves with new work-from-home freedoms.”
The most expensive markets during this quarter were split between the West and the East with the top five most expensive markets all located in the West: San Jose, California (median sales price of $1.40 million); San Francisco, California ($1.14 million); Anaheim, California ($935,000); Urban Honolulu, Hawaii ($902,500); and San Diego, California ($740,000).
Meanwhile, the national median existing single-family home price increased 14.9 percent from the previous year to $315,900 with all four major regions seeing double-digit year-over-year price gains. The Northeast saw the biggest gains at 20.7 percent, followed by the West (15.5 percent), the Midwest (15.1 percent), and the South (14.0 percent).
Thus far, low mortgage rates have helped homeowners balance the rising cost of housing amid huge demand and dwindling inventory. According to NAR, a family needed an income of $49,908 to affordably make payments on a 30-year fixed-rate mortgage with a 20 percent down payment, a modest increase from the $48,960 income needed one year ago.
However, rising home prices are outpacing gains in income, which could create barriers for potential homebuyers.
“The average working family is struggling to contend with home prices that are rising much faster than income,” Yun said.“This sidelines a consumer from becoming an actual buyer, causing them to miss out on accumulating wealth from homeownership.”
During the fourth quarter, families spent an average of 14.8 percent of their income on mortgage payments (down from 14.9 percent the year before), based on a median family income of $84,313 and a 20 percent down payment mortgage. The monthly mortgage payment rose slightly from $1,020 during Q4 2019 to $1,040 during Q4 2020. Meanwhile, the effective 30-year fixed mortgage rate dropped to 2.81 percent from 3.76 percent the year before.