Home price growth continues at its robust pace nationwide, particularly in places deeply impacted by a housing shortage. According to the latest quarterly report by the National Association of Realtors, the national median price for a single-family home in the fourth quarter of 2017 was $247,800, up 5.3 percent from the fourth-quarter 2016 median of $235,400. Overall, home prices are now at their all-time high in 114 markets (64 percent).
Single-family home prices last quarter increased in 92 percent of markets, with 162 out of 177 metropolitan statistical areas (MSAs) showing sales price gains in the fourth quarter compared to a year ago. Twenty-six metro areas (15 percent) experienced double-digit increases and 18 metros eclipsed their previous peak sales price.
Total existing-home sales increased 4.3 percent to 5.62 million in fourth-quarter 2017 from 5.39 million in the third quarter. Nationwide home sales are 1.3 percent higher than the 5.55 million pace in fourth-quarter 2016.
"A majority of the country saw an upswing in buyer interest at the end of last year, which ultimately ended up putting even more strain on inventory levels and prices," said NAR chief economist Lawrence Yun. "Remarkably, home prices have risen a cumulative 48 percent since 2011, yet during this same timeframe, incomes are up only 15 percent. In the West region, where very healthy labor markets are driving demand, the gap is even wider."
Yun added, "These consistent, multi-year price gains have certainly been great news for homeowners, and especially for those who were at one time in a negative equity situation; however, the shortage of new homes being built over the past decade is really burdening local markets and making homebuying less affordable."
The national family median income rose to $74,492 in the fourth quarter, but overall affordability still edged downward compared to a year ago because of rising mortgage rates and home prices. To purchase a single-family home at the national median price, a buyer making a 20 percent down payment would need an income of $46,808.
The numbers are even more daunting in high-priced Silicon Valley. Jeff Bell, a Coldwell Banker Realtor and board director of the Silicon Valley Association of Realtors, indicated as of January 2018, the median sales price of a single-family home in Santa Clara County was $1,170,000, up 26 percent from a year ago.
Homes in the county are being scooped up at a rapid pace, staying on the market an average of six to eight days. In Sunnyvale, a two bedroom, two bath, 848 sq. ft. home listed for $1.45 million sold last week for $2 million after just two days on the market.
Bell said last week there were only six listings in Mountain View, where he had a listing priced at $2.4 million. In order to qualify, a buyer would have to have an annual income of $340,000, with no other consumer debt (credit cards, car loans, etc.). With a 20 percent down payment, a buyer's monthly payment, including principal, interest, insurance and property taxes, would amount to a whopping $12,185.25.
While challenging, the cost does not appear to have deterred homebuyers in the area. Bell noted in one day he had 80 groups of potential buyers walk through the Mountain View home, many of whom worked at nearby Google. Most were dual income couples.
"They are the type of buyers who are in the best position to afford such a home in this current hot market," said Bell.
While a rise in mortgage rates and the impact of the new tax law on high-end markets could cause prices to moderate nationally, in Silicon Valley, where home construction has not kept pace with job creation, it is highly likely price appreciation will continue.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.