The national median existing single-family home price rose for the third-straight quarter, up 6.9% year-over-year in Q1 2017 to $232,100, which is the fastest increase since Q2 2015 (8.2%), according to the National Association of Realtors.
Single-family home prices for the period grew in 85% of the 178 observed metros, while 17% of those experienced double-digit increases. The growth represents a 4-percentage-point drop from Q4 2016, which saw increases in 89% of metro areas.
San Jose, CA, San Francisco and Anaheim-Santa Ana, CA, were among the most-expensive housing markets, while Youngstown-Warren-Boardman, OH, Cumberland, MD, and Decatur, IL, were among the least-expensive for the quarter.
A shortage of for-sale housing and high demand continue to fuel the rapid growth in home prices, NAR Chief Economist Lawrence Yun said in a statement. Existing-home listings were down 6.6% from the year-ago mark to 1.83 million, with inventory for the period at 3.7 months compared to 4.2 months in Q1 2016. The starter-home category, especially, faces intense pressure from demand, driving prices up at the fastest quarterly pace in nearly two years, according to the NAR.
Although housing affordability improved slightly during the period due to employment growth and wage gains, home prices continue to climb. And it’s those continual price increases that make it difficult for many prospective buyers to afford a down payment, causing them to delay homeownership. An increase in mortgage rates could slow activity further.
With strong demand expected to persist into the summer, builders and developers nationwide will be tasked with delivering the inventory needed to meet such demand and temper price growth. Meanwhile, the persisting lot and labor shortage and steadily rising material prices will remain headwinds that threaten to put a drag on that activity.
Still, builders are optimistic about future market conditions. The National Association of Home Builders/Wells Fargo Housing Market Index for May saw sales expectations for the next six months and current sales conditions increase during the period. Additionally, a 9.2% year-over-year gain in housing starts in March and growth in building permit authorizations show promise for residential construction activity ahead.