While the economy and employment market bear the brunt of the pandemic, US house prices show no signs of flagging in 2020. In fact, quite the opposite is true as the property statistics show for Q3. In 65% of metro areas, values went up by double digits with seven registering upticks in excess of 20%.
US house prices rise across the board
The Q3 report from the National Association of Realtors (NAR) reveals that the housing market in the US is booming. Sales continue to be buoyant indicating recovery in the market after a challenging spring.
But the surge in house prices offers the best indication of how hot the market is right now. The report examined data in 181 metros across the country and found that US house prices rose by 12% on average across the board. This brought the median price for a single-family home to US$313,500.
A full 65% of the metros in the report experienced double-digit increases with seven seeing house prices rise by over 20%. In Q2, only 15 metro areas saw double-digit upticks in house prices. All regions registered a similar pattern, although prices went up by the most in the West with a 13.7% rise.
Topping the list of highest rises in US house prices was Bridgeport in Connecticut with a 27.3% increase in the year to Q3. Crestview in Florida followed close behind with a 27.1% hike and in third place was Pittsfield in Massachusetts (up 26.9%).
Like 65% of their counterparts, Florida metros saw a similar pattern. House prices in Sarasota rose by 12.4% to US$339,000 while those in Tampa went up 12% to a median value of US$280,000. Orlando and Jacksonville experienced price increases of 10.7% and 10.6% respectively.
Behind the rise in prices
Analysts attribute part of the steady increase in prices to the lowest mortgage rates on record. A shift in lifestyle trends post-lockdown has also had an effect on the market.
“In light of the pandemic, prices jumped in a number of metros that contain larger properties and open space, said Lawrence Yun, Chief Economist at NAR. He emphasised the need for “extra rooms, including areas for an at-home office”.
Effect on supply
And the housing market shows no signs of slowing down. NAR data for October reported that sales rose by 26.6% in the year and notched up the fifth consecutive month of increases in purchases. 72% of properties sold within one month of going on the market.
Brisk sales and rising US house prices are inevitably taking their toll on supply. At the end of Q3, there were 1.47 million single-family homes on the market in the country, down 19.2% on the same period in 2019. NAR puts the current inventory level at just 2.7 months.
More new builds needed
Constantly rising house prices also affect affordability and exclude many would-be buyers from the market. “As home prices increase both too quickly and too significantly, first-time buyers will increasingly face difficulty in coming up with a down payment,” said Yun.
One of the obvious solutions lies in the new-build sector, currently also experiencing a buoyant year. “Transforming raw land into developable lots and new supply” will help tame home price growth, according to Yun.
Investors looking to buy developable lots have the chance to invest in Southwest Florida in a sought-after location close to Sarasota and Charlotte County. Prime lots with infrastructure in place start at US$26,500 with finance available from US$15,500. Investors also have the option to build-to-rent with projected rental income at 9.30% a year. Find out more.