Home prices have skyrocketed in the last two years. After a slowdown in home buying activity brought on by the start of the COVID-19 pandemic in early 2020, buying activity and price increases have been the hallmark of residential real estate in almost every American city.
The home price increase has reached a rate of about 20% in price year over previous year, according to the carefully followed S&P Case-Shiller home price index. In some markets, the figure was over 30% in April.
Among the reasons for the jump is low mortgage rates, which were often below 3% until the first quarter of this year. Rising interest rates have moved mortgage rates to over 5%, which may slow home purchases throughout the balance of the year, and bring down prices.
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Another reason home prices have risen is the workforce mobility brought on by “work from home” opportunities triggered by the pandemic. Millions of people can work from cities where they would like to live instead of cities where they have to live.
According to the National Association of Realtor’s “Median Sales Price of Existing Single-Family Homes for Metropolitan Areas,” which has data through the first quarter of this year, the price across the nation by this yardstick is $368,000, up by almost 16% year over year.
Several markets have median home prices well over $1 million, led by San Jose, home of Silicon Valley, at $1.875 million. The success of tech companies almost certainly was a major driver of these prices.
Across all the cities measured, the one with the lowest median price is Decatur in Illinois. The price there is $107,000, up only 4% from last year. The price point is not surprising. According to the Census, the median household income in the city of 95,000 people is only $45,504, a fraction of the national average. Based on this alone, the price of houses in the city is not likely to rise.
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