Home price appreciation rate accelerates in 4Q

The rate of annual home price appreciation increased during the fourth quarter, but that is likely to moderate going forward as more homes come on the market, the National Association of Realtors said.

Nationwide, the median home sales price was $391,700, a gain of 3.5% over the fourth quarter of 2022. This compares with an annual gain of 2.2% for the third quarter. The year-over-year increase for the same period in 2022 over 2021 was 4%,

But compared with the previous quarter, median prices were lower than the $406,900 posted.

Of the 221 metro areas tracked, 189 or 86% reported price gains. For the third quarter, 82% of the markets had an increase, but one year ago, 90% ended up with higher prices.

Affordability remains the leading concern in the housing market.

"Many homebuyers have been shocked at high housing costs, with a typical monthly mortgage payment rising from $1,000 three years ago to more than $2,000 last year," said NAR Chief Economist Lawrence Yun, in a press release. "This doubling in housing costs for recent home buyers is not included in the official consumer price index inflation."

All of the top 10 percentage gainers rose at or over 14.8%, led by Dayton, Ohio at 19.9%. It was followed by the Kingsport, Tennessee/Bristol (which straddles the border with Virginia) market at 19.2% and Fond du Lac, Wisconsin, at 18.6%.

Meanwhile, eight of the 10 most expensive metro areas were in California, although only Anaheim-Santa Ana-Irvine was among the leading gainers at 14.8%.

A separate release from the California Association of Realtors pointed out that only 15% of of the state's fourth quarter homebuyers could afford to purchase a median-priced, existing single-family home unchanged from the third quarter, but down from 17% a year ago

In California, a purchaser needed a minimum annual income of $222,800 to afford monthly mortgage payments of $5,570, including principal, interest and taxes on a 30-year fixed-rate loan at a 7.39% interest rate.

Meanwhile, more than a third of the nation's households could afford to purchase a $391,700 median-priced home, and they needed a minimum annual income of $104,800 to make monthly mortgage payments of $2,620, the CAR release pointed out. 

NAR had a different calculation for the monthly payments. At 20% down, the month payment was $2,163. This was 1.2% lower from the third quarter ($2,189) but up 10% from one year ago's $1,969. Families typically spent 26.1% of their income on their mortgage payments, versus 26.7% in the previous period and 24.2% in the fourth quarter of 2022.

At the end of October, mortgage rates peaked at an average of 7.79%, according to Freddie Mac. But since the start of this year, the 30-year FRM has typically been in a range between 6.6% and 6.7%, with the most recent report pegging it at 6.64%.

This week's Mortgage Bankers Association noted declines in purchase activity, which was attributed in large part to the lack of properties for sale.

But Yun was positive regarding home sales for this year. Builder sentiment in January increased on a month-to-month basis by the largest amount in almost a year, according to an index compiled by The National Association of Home Builders and Wells Fargo.

"Sales [in the fourth quarter] were restrained due to limited inventory," he said. "But increased homebuilding, along with lower mortgage rates, will not only improve housing affordability but also help bring more homes onto the market in 2024."