Housing affordability tightens as majority of US sees double-digit home price growth in Q4 2021: NAR

Home price growth reached the double digits in many metropolitan areas within U.S. real estate markets during the fourth quarter of 2021, according to new data released by the National Association of Realtors (NAR). 

Although fewer areas saw such gains in their median sales price compared to Q3 2021 – dropping from 78% to 67% – home price appreciation continued, though at a slower rate.

"Homebuyers in the last quarter saw little relief as home prices continued to climb, albeit not as fast as earlier in the year," said NAR Chief Economist Lawrence Yun. "The increasing prices are indicative of a seller’s market, with an abundance of eager buyers and very limited supply."

Homeowners could consider refinancing their mortgage to lock in a lower rate ahead of anticipated Fed rate hikes. To see how much you could save on monthly payments today, crunch the numbers and compare loan rates and mortgage lenders using Credible's free online tool.

HOME PRICES JUMPED 15% IN 2021, ACCORDING TO CORELOGIC, MORE THAN DOUBLING 2020'S RATE

Housing affordability worsens in fourth quarter of 2021

The NAR's data indicated that the growth of the median home price was slower than in Q3 2021 – up 14.6%, to an average $361,700. In particular, the Southern U.S. was the only region in which the average gain was in double digits. There, single-family home prices grew 17.9% year-over-year in Q4.

The Northeast, Midwest and Western regions of the U.S. saw median home price gains of 6.8%, 8.6% and 7.7%, respectively. Despite the slowdown, though, these increases remain well above average, and would-be homebuyers faced affordability challenges as a result, Yun said. 

"The strength of price gains are associated with the strength of the local job market, but the escalating prices took a toll on home shoppers, compelling many to come up with extra cash, and forcing others to delay making a purchase altogether," he said. "A number of families, especially would-be first-time buyers, are increasingly being forced out of the market, and this is why supply is critical to expanding homeownership opportunity."

Rising home prices also bring more equity to homeowners, and tapping that home equity through a cash-out refinance could help you fund home improvement projects, pay off high-interest debt and more. You can visit Credible to compare multiple lenders at once and choose the one with the best interest rate for you.

WHAT THE HOUSING MARKET'S 'NEW NORMAL' IN 2022 MEANS, ACCORDING TO FANNIE MAE

Rising mortgage payments costing more of household earnings

As housing affordability tightens, monthly mortgage payments have also risen, according to NAR’s data. In 2021's fourth quarter, average monthly payment on a single-family home valued at $361,700 – with a 20% down payment and on a 30-year mortgage with a rate of 3.13% – increased $201 from the year prior, up to $1,240. 

Families allocated an average of 16.9% of their incomes on mortgage payments in Q4, the NAR said, compared to 14.7% a year ago. Furthermore, the trade association's data said that first-time homebuyers spent more than a quarter of their income (25.6%) on their mortgage payments, which made paying for a home unaffordable.

"The good news is that home prices should begin to normalize later in 2022 as more homes come on the market," said Yun.

Since the fourth quarter, mortgage rates have risen significantly, according to data from Freddie Mac, and monthly payments for those who purchased a home at the beginning of 2022 have also increased. 

In order to stay on track with your finances, you could consider refinancing your mortgage to potentially lower monthly costs. Use Credible's free online tool to research different mortgage refinance lenders and see what your loan options are.

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