Home prices are falling fastest in these 25 cities, helping buyers escape the least

Affording a house in the US hasn’t been this difficult since “Back to the Future” was the top movie in theaters.

Home affordability fell again in the third quarter to its lowest level since 1985, shown by data from the National Association of Realtors shared exclusively with Insider.

Would-be buyers remain out of luck as property prices steadily climb. In the NAR’s Q3 US housing-market report, released Thursday, the median US home price was $406,900 — 2.2% higher than last year. That follows a 2.4% year-over-year decline in Q2.

As if elevated home prices weren’t enough of a challenge, buyers must also contend with mortgage rates at a 23-year high.

Thirty-year fixed mortgage rates ranged from 6.8% to 7.3% last quarter, the NAR found. In turn, the trade group said the average monthly payment for a standard starter home with a 10% down payment rose 6.9% in Q3 from the prior quarter and a crippling 19% year over year.

It also found nearly 27% of a typical family’s monthly income went toward mortgage payments in Q3, which was slightly higher than the 25.3% rate in Q2 and the 23.5% clip in Q3 2022. In almost half of US markets, families needed at least a six-figure income to afford such a setup.

Naturally, homeowners are reluctant to move since they’d face exorbitant borrowing costs. Plus, by staying put, they benefit from swelling home values caused in part by limited supply. That creates a self-fulfilling prophecy where a housing shortage drives prices even higher.

“Homeowners have accumulated sizable wealth, with a typical homeowner gaining more than $100,000 in overall net worth since 2019 and before the height of the pandemic,” said Lawrence Yun, the NAR’s chief economist, in a statement for the NAR’s new report.

Yun continued: “However, the persistent lack of available homes on the market will make the dream of homeownership increasingly difficult for younger adults unless housing supply is significantly boosted.”

25 cities where home prices receded in Q3

Contrary to some pundits’ predictions, property prices didn’t crater because of lofty mortgage rates.

Home values rose in 82% of the real-estate markets that the NAR tracks, which is significantly higher than the 58% rate from April to June. Even more striking is that 11% of metropolitan areas saw prices grow by double digits, which was more than double the prior quarter’s 5% rate.

Single-family home prices rose fastest in the Northeast and the Midwest by just over 5% each, the NAR found, while the South and the West saw milder increases of 1.7% and 0.6%.

But property prices did fall in some cities. Thirty-eight metro areas saw prices fall from 2022 in Q3, and 25 of those saw significant drops of over 1%.

“Following the big price changes during the last several years, it’s natural to witness momentary swings in prices,” Yun said in the report. “Some markets that experienced sizable home price gains since 2020 have turned lower, resulting in temporary relief for prospective home buyers.”

Below are the 25 US metro areas where single-family home prices fell at least 1% from last year in the third quarter, as determined by the NAR. Along with each market is its year-over-year home-price change and the median home price in the second and third quarters of 2023, as well as the third quarter of 2022.

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