Home Prices Hit New Highs in 2016

In an interesting dichotomy, the sale of homes increased in 2016 while simultaneously becoming even less affordable for potential buyers.

According to a quarterly report by the National Association of REALTORS® (NAR) for the final three months of 2016, not only were these trends identified, but also the sales prices in more than half of the markets tracked since 2005 have equaled or surpassed previous peak levels.

The real estate market continued to flourish in 2016 in the majority of the country, but with prices and mortgage rates spiking, the future remains cloudy for affordable housing options if these trends continue.

“Buyer interest stayed elevated in most areas thanks to mortgage rates under four percent for most of the year and the creation of 1.7 million new jobs edging the job market closer to full employment,” said Lawrence Yun, chief economist for NAR. “At the same time, the inability for supply to catch up with this demand drove prices higher and continued to put a tight affordability squeeze on those trying to reach the market.”

Of the 178 metropolitan areas measured in the ongoing study, 89 percent saw an increase in the price of the median existing single-family home compared with the fourth quarter of 2015.

Additionally, more markets saw increases in the fourth quarter of 2016 than in the third quarter (87 percent increase).

“Depressed new and existing inventory conditions led to several of the largest metro areas seeing near or above double-digit appreciation, which has pushed home values to record highs in a slight majority of markets,” Yun said. “The exception for the most part is in the Northeast, where price growth is flatter because of healthier supply conditions.”

The national median existing single-family home price in the fourth quarter of 2016 was $235,000, an increase of 5.7 percent from the fourth quarter of 2015 ($222,300). Similarly, the median price during the third quarter of 2016 increased 5.4 percent from the third quarter of 2015.

At the end of 2016, there were 1.65 million existing homes available for sale, a drop of 6.3 percent from the end of 2015 and the lowest level since NAR began tracking the supply of all housing types in 1999.

“The prospect of higher mortgage rates and more home shoppers in coming months should be enough of an incentive for those serious about buying to start their search now,” said NAR President William E. Brown, who is also a REALTOR© from Alamo, Calif. “There are fewer listings on the market, but also a little less competition than what’s expected this spring. Buyers may find just the home they’re looking for at a good price and without the possibility of having to outbid others.”

Existing home sales, which include both single family homes and condominiums, increased by 3.3 percent from the third to the fourth quarter in 2016 and are 7.1 percent greater than where they were a year earlier.