Growth of home sale prices slowed, but affordability worsened

Rising mortgage rates added pressure for homebuyers in Q4: NAR

NAR's chief economist, Lawrence Yun (National Association of REALTORS, iStock)
NAR's chief economist, Lawrence Yun (National Association of REALTORS, iStock)

The fourth quarter of 2021 held a glimmer of good news for homebuyers: growth in home prices slowed. The bad news: affordability worsened overall amid rising prices and mortgage rates.

Of the 183 markets measured by the National Association of Realtors’ quarterly report, 67 saw a double-digit increase in median sales prices for existing single-family homes in the fourth quarter. The figure stands slightly below the 78 percent of markets seeing the same increase in the third quarter.

The median single-family sales price across the country rose 14.6 percent year-over-year to $361,700 in the fourth quarter, a slight tick down from the 15.9 percent annual rise in the third 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 Lawrence Yun, NAR’s chief economist. “The increasing prices are indicative of a seller’s market, with an abundance of eager buyers and very limited supply.”

Making matters worse for homebuyers is increasing mortgage rates. In 2020’s fourth quarter, the average monthly mortgage payment considering a 20 percent down payment was $1,039, based on an average mortgage rate of 2.81 percent. In 2021, the average payment was $1,240, based on a mortgage rate of 3.13 percent.

The share of families’ income spent on mortgage payment jumped from 14.7 percent to 16.9 percent year-over-year. The problem is only likely to grow, as Freddie Mac announced on Thursday the average mortgage rate hit 3.69 percent, its highest level since January 2020.

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“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,” Yun added.

Still, Yun professed optimism for buyers in the coming year.

“The good news is that home prices should begin to normalize later in 2022 as more homes come on the market,” Yun said.

The largest annual gains in home prices hit Punta Gorda, Florida, where prices rose 28.7 percent, followed closely by Ocala, Florida, with a 28.2 percent gain. Other significant markets seeing major year-over-year sales price gains include Austin-Round Rock, Texas (25.8 percent), Phoenix-Mesa-Scottsdale, Arizona (25.7 percent) and Las Vegas-Henderson-Paradise, Nevada (24.7 percent).