By Mike Bodeen · 22 May 2017
Nationally, when accounting for population growth, the pace of sales today reflects what economists consider a normal market like that of the early 2000s, when the pace of sales was just under 5 million homes a year. The pace of sales topped out at roughly 6.2 million in 2005, at the height of the housing bubble.
Price growth, meanwhile, remains subdued compared with the bubble years, but is perking up as well. Single-family home prices increased year-over-year in 85% of the 178 markets covered in NAR’s survey. In the fourth quarter, 89% of markets reported higher prices.
So, this is good news, indeed healthy news for most of the nation. As homeowners, we expect appreciation, but we’ve also learned the hard lesson, that it’s not guaranteed. As mentioned in our blog last week the median sales price of a home nationally is $232,100. The median sales price of a home in Metro Phoenix is $232,500. Our sales appreciation from year to year is also close to the national rate of about 6%.
There is a huge disparity between the most and least expensive housing markets in the country. A mid-price home in San Jose, Calif. – the most expensive metro area in the country – now costs $1.07 million, while the typical home in the cheapest market – Youngstown, Ohio – costs just $79,200.
Home prices in San Jose have shot up 10% over the past year, while prices in the Youngstown area increased 4% during that time. Homes have become less affordable over the past year due to rising prices and mortgage rates, though they remain theoretically within reach for most families.
A buyer making a 5% down payment on the median-priced U.S. home (or Phoenix) would need an income of roughly $52,000, compared with the national median household income of just over $71,000. Now get this, a buyer making a $100,000 down payment (10%) on an “average” priced home in San Jose, needs to make over $200,000 per year income.
Should (when) there comes a downturn in the tech sector as happened in 2000, I believe that we will see a domino effect with the Silicon Valley home market. Some believe the tech sector bubble is beginning now to burst. (https://www.wsj.com/articles/this-tech-bubble-is-bursting-1462161662)
Metro communities such as Phoenix and Las Vegas will not be impacted like San Jose, but could in fact prosper from California business migration.