Median Price of American Homes Climbs Above $400,000 for the First Time

The median price for a single-family existing-home has crossed the $400,000 mark for the first time ever, according to the National Association of Realtors (NAR).

Existing single-family homes had a median price of $413,500 nationally in the second quarter of 2022, a 14.2 percent increase from a year ago, according to an Aug. 11 news release. Price appreciation eased slightly, dropping from the previous quarter’s 15.4 percent hike. “Overall, the national price deceleration inevitably followed the softening sales, providing well-positioned prospective buyers a small measure of welcomed relief,” said Lawrence Yun, NAR’s chief economist.

However, home prices have risen at a pace that “far exceeds” wage gains, especially for low- and middle-income workers, he pointed out.

Home affordability woes rose in the second quarter. A typical starter home, for example, valued at $351,500, with a 10 percent downpayment, required a mortgage payment of $1,810 per month. This is $433 higher than the payment in the first quarter and $597 more when compared with that during the second quarter of 2021.

While during the first quarter first-time buyers spent 28.7 percent of their family income on mortgage payments, that figure went up in the second quarter, to 36.8 percent. It’s often considered that if the monthly payment exceeds 25 percent of a family’s income, the mortgage is generally considered to be unaffordable.

In almost 53 markets, a family required at least $100,000 to afford a mortgage with a 10 percent down payment, up from 27 markets in the previous quarter. Only 23 markets allowed families with less than $50,000 to afford a home, down from 63 in the first quarter.

Waning Affordability

A report from Standard & Poor’s predicted that housing affordability will become worse this year, deteriorating to levels seen during the first quarter of the 2007 financial crisis.

The 25 percent affordability threshold has already been breached for low- and middle-income homebuyers, a trend that will remain through 2025, the credit ratings agency said. This will keep 60 percent of U.S. households out of the market.

By fourth quarter 2022, a first-time buyer with a median income will need 11.3 years to save for a 10 percent downpayment for a home, almost double the time it took before the COVID-19 pandemic, the agency estimated.

On the plus side, some experts believe the housing market is due for a correction. For example, in a note to clients in late July, Ian Shepherdson, a chief economist at Pantheon Macroeconomics, pointed out that listings of single-family homes have risen by 40 percent in the previous four months, although unit sales declined due to high prices and elevated mortgage rates.

Once taking into account current conditions, U.S. home prices are potentially “about 15 to 20 percent overvalued” compared to incomes, Pantheon calculates, according to the New York Post.

“The market is adjusting to a new reality, with much lower sales volumes and far more inventory. Prices, therefore, have to adjust to the downside, likely quite substantially,” Shepherdson said.

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