The vast majority of metro areas saw price gains and very small increases in inventory in the final quarter of 2019, according to the latest quarterly report by the National Association of Realtors.

Median single-family home prices increased year-over-year in 94% of measured markets in the fourth quarter, with 170 of 180 metropolitan statistical areas¹ showing sales price gains. That is up from the 93% share in the third quarter of 2019. The national median existing single-family home price in the fourth quarter was $274,900, up 6.6% from the fourth quarter of 2018 ($258,000).

"It is challenging – especially for those potential buyers – where we have a good economy, low interest rates and a soaring stock market, yet are finding very few homes available for sale," said Lawrence Yun, NAR chief economist. "We saw prices increase during every quarter of 2019 above wage growth."

At the end of last quarter, 1.40 million existing homes were available for sale,² 8.5% less than total inventory at the end of 2018's fourth quarter. Average supply during the fourth quarter of 2019 was 3.5 months – down from 4.0 months in the fourth quarter of 2018.

Eighteen metro areas witnessed double-digit price growth last quarter, including Trenton, N.J. (18.2%), Boise City-Nampa, Idaho (13.7%), Gulfport-Biloxi, Miss. (11.8%), Kingston, N.Y. (11.2%) and Albuquerque, N.M. (11.1%). Some of the increases are due to the changes in the type of home that were sold during the quarter.

"Rising home values typically create wealth gains for existing homeowners as shown in NAR's latest study, however, areas that are deemed 'too expensive' will obviously have trouble attracting residents and companies looking to do business there," Yun said. "We need a good balance that benefits both current and future homeowners, but right now, the balance is still in favor of home sellers."  

Prices continue to rise even in America's most expensive metro areas. Of the top 10 most costly metros, only San Jose saw a year-over-year decline in single-family sales price ($1.246 million; -0.3%). Other high-priced areas include San Francisco, Calif. ($990,000; 3.9%); Anaheim-Santa Ana, Calif. ($828,000; 3.6%); Urban Honolulu, Hawaii ($812,600; 0%); San Diego, Calif. ($655,000; 4.6%); Boulder, Colo. ($630,400; 6.4%); Los Angeles-Long Beach, Calif. ($617,300, 7.2%); Seattle-Tacoma, Wash. ($528,800;8%); Nassau County, N.Y. ($496,600; 3.7%); and Boston-Cambridge, Mass. ($482,800; 4.9%).

Affordability Improvements Since Last Quarter

Despite rising home prices, falling mortgage rates in 2019 made it more affordable for a family to manage monthly mortgage payments, enticing many first-time buyers. The 30-year fixed rate averaged 3.76% in 2019 Q4, down from 4.95% one year ago. Because of the lower mortgage payment, the income needed for a family to afford a mortgage³ decreased to $48,960 from $52,896 one year ago.

The actual 2019 Q4 median family income increased to $79,740 from $77,093 one year ago. When viewed as a share of the estimated national median family income of $79,740⁴, a family spent 15.3% of income on mortgage – compared to 17.2% one year ago.

With this, first-time home buyer affordability improved as well. The starter median home price in 2019 Q4 fell to $233,800, while the monthly mortgage payment decreased to $1,006, assuming a 10% down payment. First-time home buyers needed a lower level of income to afford a mortgage payment, at $48,288, compared to the qualifying income in the third quarter of 2019 ($48,864).

In the most expensive metro area of San Jose, a family would need an income of $223,900 to afford a 30-year fixed mortgage at a 20% down payment. The qualifying income rises to $265,800 on a 5% down payment loan. In the top 10 most expensive metro areas, a family would need to make more than $100,000 to afford a mortgage payment on a median-priced home with a 5% down payment on a 30-year fixed rate mortgage.  

The 6.6% increase in single family sales prices represented a faster pace compared to the 5.1% mark in 2019 Q3. Compared to the same quarter one year ago, median prices rose at the fastest pace in the West (7.3%), followed by the Midwest (6.8%), South (6.1%) and Northeast (5.8%). 

Median home prices were highest in the West region at $413,500 and were the least expensive in the Midwest, at $210,200. At these prices, the minimum income needed to afford a median-priced home after a 20% down payment was $74,307 in the West, but only $37,773 in the Midwest.