Against a bleak backdrop of record Covid-19 infections, high unemployment, a divisive and contested presidential election, and a faltering economy, surprisingly, home prices continue to rise in many markets across the country.
Home Prices Rose by Double Digits Over Q3 2019
A recent report from the National Association of Realtors (NAR) revealed that, despite expectations of some forecasters that home prices might tank, the median price for single-family homes in the metro regions studied rose significantly in the third quarter compared to 2019. With U.S. home buyers competing over a historically low number of available properties, home prices are up over 12% compared to the same period last year.
Gay Cororaton, a senior economist with NAR said of the trend, "It's unbelievable. It's a record number of metro areas showing double-digit price gains. We have never seen this widespread price growth."
Home Prices Were Examined in 181 Metro Markets
NAR’s market report examined 181 metropolitan markets and included existing single-family homes in each city and its surrounding suburbs, towns, and smaller urban areas. New home prices were not included in the study. The report revealed prices were up by double digits in about two-thirds of those metro markets, with the median home price at $350,000.
While homeowners and real estate investors are celebrating the hot market and higher sales prices, the news is not as welcome to eager home buyers who were hoping that along with record-low mortgage rates, rock-bottom prices might result from the faltering economy.
"Favorable mortgage rates will continue to bring fresh buyers to the market,” NAR's Chief Economist Lawrence Yun said. "However, the affordability situation will not improve even with low-interest rates because housing prices are increasing much too fast.”
Largest Price Spikes Were in the West
The largest spikes were in the West, where prices went up 13.7% in the third quarter compared with the previous year. Prices rose 13.3% in the Northeast, 11.4% in the South, and 11.1% in the Midwest.
"The West has one of the tightest numbers of homes for sale," Cororaton said. "Buyers have to compete against other buyers. Homes are selling quickly. That's pulling up prices."
“In light of the pandemic, prices jumped in a number of metros that contain larger properties and open space—where families could find extra rooms, including areas for an at-home office,” Yun said.
At the city level, the top 10 metro areas experiencing double-digit price jumps:
27.3% Bridgeport, CT
27.1% Crestview, FL
26.9% Pittsfield, MA
21.5% Kingston, NY
21.5% Atlantic City, NJ
20.6% Boise, ID
20.6% Wilmington, NC
19.4% Barnstable, MA
19.1% Memphis, TN
19.1% Youngstown, OH
For real estate investors who are flipping houses in these and other metro areas, many are finding their refurbished homes are hot commodities--sparking bidding wars among buyers who are eager to take advantage of low-interest rates, but are challenged by record inventory shortages.