Meme stocks have garnered a lot of attention as of late, but there’s another sector of the US economy that has been doing gangbusters — the housing market.
In the fourth quarter of 2020, the median price of an existing single-family home reached $315,900, a 14.9 percent annual increase, according to the National Association of Realtors. All of the metropolitan areas included in the sampling posted year-over-year price gains, and 88 percent saw double-digit appreciation.
Despite cooling temperatures, the housing market heated up in every region of the country. The Northeast led home price growth at 20.7 percent, followed by the West at 15.5 percent, the Midwest at 15.1 percent and the South at 14.0 percent.
“The fourth quarter of 2020 presented circumstances ripe for home price increases,” said Lawrence Yun, NAR chief economist.
“Mortgage rates reached record lows, thereby driving up the demand. At the same time, inventory levels also reached record lows, leading to grim inventory conditions of insufficient supply in the fourth quarter.”
Homeowners gained significant equity during the fourth quarter and many were able to refinance their mortgages to ensure lower monthly payments. Although homebuyers also benefited from record-low mortgage rates, giving them greater purchasing power, rising home prices threaten to sideline working-class families in the near future if this trend continues.
An annual income of $49,908 was needed to afford the country’s median-priced single-family home assuming a 30-year fixed-rate mortgage with a 20 percent down payment. That’s up 2 percent from the fourth quarter of 2019.
In nearly three-fourths of metros, families needed less than $50,000 to cover the typical mortgage payment, a slight improvement over Q3 2020. However, seven metro areas tracked by NAR required a salary of over $100,000 to afford the median-priced home.
Listed among these high-priced markets was San-Jose-Sunnyvale, CA ($222,989); San Francisco, CA ($181,576); Anaheim, CA ($148,925); Urban Honolulu, HI ($143,748); San Diego, CA ($117,865); Los Angeles, CA ($109,694); and Boulder, CO ($105,330).
Although the 30-year fixed-rate average fell to 2.81 percent in the fourth quarter, surging home prices caused the typical US mortgage payment to increase by $20 compared to the same period one year earlier.
“The average, working family is struggling to contend with home prices that are rising much faster than income,” added Yun.