There's an undersupply of homes for sale so prices aren't dropping.
Home-Price Growth Slows Under Tide of Rising Mortgage Rates
Prices in most areas remain higher than they were a year ago because supply remains limited
Rising mortgage rates have boosted borrowing costs for prospective home buyers and pushed many out of the market.
By Nicole Friedman, WSJ
Nov. 10, 2022 7:00 am ET
U.S. home-price growth slowed sharply in the third quarter, the National Association of Realtors said Thursday, as home-buying affordability remained near its lowest level in decades.
Nationwide, the median sales price of an existing single-family home last quarter was up 8.6% from a year earlier to $398,500, according to NAR, a slowdown from the second quarter’s 14.2% pace.
The large price gains that characterized the housing boom for much of the past two years are also becoming much less widespread. Median prices were up 10% or more in 46% of the 185 metro areas tracked by NAR in the third quarter, compared with 80% of metro areas in the second quarter.
Rising mortgage rates have boosted borrowing costs for prospective home buyers and pushed many out of the market. Home sales have dropped for eight straight months through September.
Home prices have slid from their springtime highs around the country. It is typical in many markets for prices to tick lower in the fall and winter, as home-buying activity is usually slower than in the spring and summer. But some markets are now experiencing annual price declines.
The metro area to post the biggest fall in the third quarter from a year earlier was Cumberland, Md., where median prices were down 4.5%, followed by Bismarck, N.D., down 4.1%, and San Francisco, down 3.7%, NAR said.
Still, prices in most areas remain higher than they were a year ago because supply remains limited. The third-quarter median sales price for single-family existing homes was up from a year earlier in 181 of the 185 metro areas.
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Many prospective sellers are opting to stay put rather than give up their current low mortgage rates, keeping the number of homes on the market lower than normal, economists and real-estate agents say.
“Much lower buying capacity has slowed home price growth, and the trend will continue until mortgage rates stop rising,” said Lawrence Yun, NAR’s chief economist.
The NAR’s housing-affordability index, which factors in family incomes, mortgage rates and the sales price for existing single-family homes, fell in September to its lowest level since June. The June reading was the lowest in decades.
The average rate on a 30-year fixed-rate mortgage was 6.95% in the week ended Nov. 3, according to mortgage-finance giant Freddie Mac, up from 3.09% a year earlier.
Homes typically go under contract a month or two before the contract closes, so the third-quarter price data largely reflect purchase decisions made in the second quarter or beginning of the third quarter, when mortgage rates were lower than they are today.
In the third quarter, the typical monthly mortgage payment for a single-family home was $1,840, up from $1,226 a year earlier, NAR said.
Worsening housing affordability is prompting more households to consider relocating. Real-estate brokerage Redfin said 24.2% of shoppers on its platform searched for homes outside their metro area in the third quarter, up from 23.3% in the second quarter and about 18% before the pandemic.
The number of home sales is likely to keep falling due to the higher interest rates, said Skylar Olsen, chief economist at Zillow Group.
“I think we’re going to see volumes pull back significantly,” she said. “We might not see prices fall very dramatically at a national level though,” she said, because the inventory of homes on the market remains low.
Florida and the Sunbelt had some of the biggest price gains. The North Port, Fla., metro area posted the largest increase in the third quarter, with the median price up 23.8% from a year earlier, according to NAR. Next were the Lakeland, Fla., metro area, up 21.2%, and Myrtle Beach, S.C., up 21.1%.