Prices Keep Climbing As Demand For Budget-Friendly Homes Heats Up

Posted on May 10, 2023 by TMN Editor

Home sale prices keep climbing thanks to high competition in budget-friendly markets.

The National Association of Realtors’ (NAR) latest quarterly report found that single-family existing-home sales prices increased in about 70% of metros (152 out of 221) in Q1 2023. 

The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $1,859, up 33% YOY.

At the same time, the national median price for these homes fell 0.2% YOY to $371,200.

The divide in demand between affordable and expensive markets is the main factor in these numbers. High-end markets with the most expensive homes are seeing declines, while cheaper areas are seeing intense competition for the few affordable homes for sale, pushing prices up.

“Generally speaking, home prices are lower in expensive markets and higher in affordable markets, implying greater mortgage rate sensitivity for high-priced homes,” NAR Chief Economist Lawrence Yun said.

These data are in line with trends reported by other analysts throughout Q1. Black Knight reported that in March, home prices rose across the country, with almost every metro they analyzed posting gains.

 “[J]ust five months ago, prices were declining on a seasonally adjusted month-over-month basis in 92% of all major U.S. markets. Fast forward to March, and the situation has done a literal 180,” said Black Knight Vice President of Enterprise Research Andy Walden.

New data from Zillow also confirms the reappearance of a seller’s market, finding that typical home values climbed 1% from March to April, the strongest month-over-month appreciation since last June and, significantly, in line with pre-pandemic spring norms.

Low inventory remains the driving force for home prices. There were 28% fewer new listings in April than at the same time last year.

“As long as you have the law of supply and demand, there’s nothing really to depress prices,” John Rice, chief statistician for the Seacoast Board of Realtors, told the New Hampshire Union Leader. 

“The ceiling hasn’t been reached, and who knows where that is.”

But determined buyers who are willing to do their research can still find deals. Markets that saw prices balloon abnormally during the pandemic are experiencing some of the most rapid price drops, Yun noted.

“For example, home prices grew an astonishing 67% in three years in Boise City and Austin through 2022. The latest price reductions in these areas have improved housing affordability and led to some buyers returning given the sustained, rapid job creation in their respective markets,” he said.