The annual appreciation in house prices remained in flames in February, reaching its highest level in more than 15 years.
Nationwide, real estate prices rose in February at a record rate of 11.6% year-on-year, according to Black Knight. In addition, daily data on home sales by the company’s Collateral Analytics group showed an annual increase in the median single-family home sales price of 15.9%.
“Several years of constrained housing stocks and historically low interest rates helped fuel this fire to the point where nearly 75% of the top 100 US markets saw house prices grow 10% or more annually,” said Black Knight Data & Analytics President Ben Graboske. In addition, Collateral Analytics’ market conditions report shows real estate markets in 75% of zip codes that were rated either ‘strong’ or ‘hot’ based on the underlying market metrics. Only 7% are marked as “normal”.
The sharp rise in both property prices and interest rates has brought affordability to its lowest level since mid-2019. Graboske said it now takes 20% of median household income to make the monthly payment for an average-priced home – back to the five-year average after several years of low interest rates to mitigate the impact of rising prices on affordability.
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“Housing has been the least affordable since mid-2019 – taking into account interest rates, property prices and income,” he said. “All hopes for 2021 of bringing an influx of houses to market and easing pressure on prices seem to be dashed for the time being, as new sales offers fell 16% and 21% year over year in January and February, respectively . ”
There are now 125,000 fewer new registrations than in the first two months of 2020, which means that the inventory for sale is 40% below the previous year’s level.
“With higher interest rates and ongoing inventory shortages, it will be important to keep an eye on both home prices and affordability metrics over the coming months,” said Graboske.