The housing market is experiencing a significant surge, with more than 80% of metro areas witnessing home price increases in the third quarter of 2023, according to the latest quarterly report from the National Association of REALTORS® (NAR). This surge comes amid fluctuations in mortgage rates, raising concerns about the accessibility of homeownership, especially for younger adults.
Market Dynamics and Trends
According to Lawrence Yun, Chief Economist at NAR, homeowners have seen substantial wealth accumulation, with the typical homeowner gaining over $100,000 in overall net worth since 2019. However, the persistent lack of available homes on the market is making homeownership increasingly challenging for younger generations. The 30-year fixed mortgage rates, ranging from 6.81% to 7.31%, have contributed to this scenario.
Year-over-year, the national median single-family existing-home price increased by 2.2% to $406,900. The South led in single-family existing-home sales with a 46% share, experiencing a 1.7% year-over-year price appreciation. Meanwhile, the West saw a modest 0.6% price growth. Notably, certain metro areas, including Austin and Phoenix, experienced price declines, while others like San Jose and Anaheim recorded substantial increases.
Regional Variations and Top Performers
The South dominated with the largest share of home sales, while the Midwest showcased impressive year-over-year price increases in several metro areas. The top 10 metro areas with the most substantial price hikes, recording gains of at least 12.6%, were predominantly in the Midwest, emphasizing the region's robust real estate performance.
California, however, continued to be a focal point for expensive markets, with eight of the top 10 most expensive areas located in the state. San Jose-Sunnyvale-Santa Clara, Calif., topped the list with a median home price of $1,850,000, reflecting a 9.6% increase.
Metro Areas in the Midwest Lead Top 10 in Year-Over-Year Price Increases
The real estate landscape showcases remarkable growth, with the top 10 metro areas experiencing substantial year-over-year price increases, all recording gains of at least 12.6%. Notably, six of these thriving markets are located in the Midwest, underlining the region's robust real estate performance.
- Fond du Lac, Wis.: A remarkable 18.9% year-over-year price increase.
- Hickory-Lenoir-Morganton, N.C.: Impressive growth at 17.1% in the same period.
- Oshkosh-Neenah, Wis.: Noteworthy with a 15.2% year-over-year price surge.
- Green Bay, Wis.: Strong performance, recording a 14.8% increase.
- Reading, Pa.: Demonstrating solid growth with a 14.7% year-over-year price rise.
- Newark, N.J.-Pa.: Sustaining growth with a 14.3% increase in the same period.
- Dayton, Ohio: Notable performance, boasting a 13.7% year-over-year price gain.
- Fort Wayne, Ind.: Strong real estate growth, registering a 12.9% increase.
- Farmington, N.M.: A significant 12.7% year-over-year price upswing.
- Kankakee, Ill.: Showing resilience with a 12.6% increase in the same period.
California Dominates List of Most Expensive U.S. Real Estate Markets
When it comes to luxury real estate, California takes center stage, with eight of the top 10 most expensive markets in the United States located within the state. These exclusive markets reflect not only opulence but also diverse trends in property value appreciation.
- San Jose-Sunnyvale-Santa Clara, Calif.: Securing the top spot with a median home price of $1,850,000 and a significant 9.6% year-over-year increase.
- Anaheim-Santa Ana-Irvine, Calif.: Following closely with a median home price of $1,305,000 and an 8.7% year-over-year increase.
- San Francisco-Oakland-Hayward, Calif.: A median home price of $1,300,000, reflecting a 1.6% year-over-year increase.
- Urban Honolulu, Hawaii: An outlier on the list with a median home price of $1,061,900, experiencing a -5.8% year-over-year decrease.
- San Diego-Carlsbad, Calif.: Maintaining its allure with a median home price of $978,500 and an 8.7% year-over-year increase.
- Salinas, Calif.: A robust market with a median home price of $945,300, showcasing a 5.3% year-over-year increase.
- Oxnard-Thousand Oaks-Ventura, Calif.: Demonstrating resilience with a median home price of $921,500 and a 3.8% year-over-year increase.
- Los Angeles-Long Beach-Glendale, Calif.: A prestigious market with a median home price of $897,600, marking a 1.4% year-over-year increase.
- San Luis Obispo-Paso Robles, Calif.: Sustaining its appeal with a median home price of $889,900 and a 1.7% year-over-year increase.
- Boulder, Colo.: Representing the only non-Californian entry on the list, with a median home price of $857,800 and a 3.7% year-over-year increase.
Challenges for First-Time Buyers and Affordability Concerns
Despite the overall positive trends, the report highlights challenges for first-time buyers. Housing affordability worsened in the third quarter due to rising home prices and mortgage rates. The monthly mortgage payment for a typical existing single-family home with a 20% down payment increased to $2,192, a 7% rise from the second quarter and a 19.2% increase from one year ago.
First-time buyers faced particular difficulties, with the monthly mortgage payment for a typical starter home rising to $2,149, a 6.9% increase from the previous quarter. This challenges the dream of homeownership for many, as families typically spent 40.4% of their income on mortgage payments, up from 38.2% in the prior quarter.
Call for Action
Lawrence Yun emphasized the need for intervention to maintain market accessibility, calling on the Federal Reserve to consider cutting interest rates. Congress, Yun suggested, should also explore incentives to boost housing supply and inventory, ensuring that homeownership remains within reach for a broader spectrum of Americans.
