As the number of available homes on the market has fallen, the price for those homes has gone up in just about every metro area of the U.S.
The National Association of Realtors (NAR) reports that the median home price in the fourth quarter of last year rose in 94 percent of metros, with prices rising in 170 of 180 markets. That pushed the median home price up to $274,900, 6.6 percent higher than the fourth quarter of 2018.
"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’s chief economist. "We saw prices increase during every quarter of 2019 above wage growth."
Near-record low inventory
The inventory of available homes is not just down, it’s at its lowest point since Zillow began tracking that data in 2012. The real estate marketplace reported last month that inventory was down year-over-year in 31 of the 35 largest U.S. housing markets, with Seattle, San Diego, and Sacramento seeing the largest drawdowns.
The exceptions to shrinking inventory are San Antonio, Detroit, Atlanta, and Chicago -- the only markets where inventory actually increased over the last 12 months.
With demand rising due to demographic factors and falling interest rates, the pressure on the shrinking home supply is the main factor causing prices to rise.
At the end of the year, NAR reported 1.40 million existing homes were on the market, a mark that was significantly lower than the number of available homes in the fourth quarter of 2018. Because of that, 18 metro areas saw double-digit price growth last quarter, including Trenton, N.J. at 18.2 percent; Boise City-Nampa, Idaho at 13.7 percent; and Gulfport-Biloxi, Miss. at 11.8 percent.
Small markets see big increases
Some of the strongest price growth occurred in smaller metro areas; prices moderated in larger markets that have seen an outward migration of younger residents who have sought more affordable housing elsewhere.
"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."
Yun says a bright spot in the housing outlook is the cost of a mortgage. Interest rates on home loans are near a three-year low, helping to offset rising prices by moderating the monthly payment.