Rising home prices in the United States are giving buyers sticker shock virtually everywhere they look. Such is the reality of a real estate market that has continued to rocket to new heights at a dizzying pace over the last two years.
If you really want a sense of how wild some of the price inflation has become, the top 20 hot real estate markets together show just how competitive things have become in highly desirable places.
New data from Realtor.com show that the top 20 markets in February combined for an average median list price of $562,000. That’s 43% higher than the national average of $392,000, which reached its own record high in February.
“The shortage of inventory has led to a fast pace of sales, with buyers snapping up properties as soon as they hit the market,” said George Ratiu, senior economist at Realtor.com. “Moreover, the surge in mortgage rates in the first six weeks of the year further prompted buyers to find a home before rates move even higher. These factors have pushed median prices to record highs, not only in the hottest markets but across the entire country.”
The belief that higher mortgage rates might temper competition and lead to price moderation among home sellers simply has not happened thus far in 2022. The expectation that mortgage rates will continue to rise, particularly in the context of larger global affairs and domestic pressures from high fuel prices. These factors tend to encourage increased interest rates among lenders who want to preserve the buying power of their money.
Hot markets are measured by the views home listings generate and how long listings remain active before the homes are sold.
The hottest market in the U.S. currently is Manchester, New Hampshire, a former mill town that is perennially among the hottest in the country. The median listing price there shot up to $493,900.
In California, a notoriously pricey market, the median list price in Santa Cruz surged to $1,243,250. In Salinas, it hit $909,000 and in Vallejo, it rose to $593,500. Those two markets rounded out Realtor.com’s top 10. Santa Maria, the most expensive in the top 20, hit an astonishing $1,625,000.
“California buyers have made it known (that) they are ready to play the game of real estate, despite the rising costs, even though they are over the national median,” said Chantay Bridges, a senior real estate specialist at EXP Realty in Beverly Hills. “While some have opted for more desirable price points in other states, there is still a large number that love the weather and all that California has to offer. They are not going anywhere. They are paying whatever it takes to have their dream home, over national median or not.”
Even quieter locales that have long been considered affordable, like Rochester, New York, saw rising median prices and significant competition among buyers. The median price there is now $225,000, well below the national median. It’s the nation’s sixth hottest market.
In Florida, one of the most competitive states in the country, only North Port in Sarasota County cracked the top 20. The median list price there is $547,500. What’s notable in North Port is that year-over-year, the market climbed from 115th hottest in the country to 12th.
What these figures indicate is that home competition is hitting all levels of the U.S. real estate market. Several of the hottest markets — Topeka, Kansas ($184,000); Springfield, Massachusetts ($317,250); and Fort Wayne, Indiana ($289,000) — are below the national median.
There is some hope for buyers that enough demand, combined with higher mortgage rates, will eventually ease competition to see price growth slow down. In some places, prices will likely start to decline from their 2021 peaks.
“Over the past six months, during late fall and winter, we’ve seen about a dozen metros across the country experience year-over-year price declines, as more new listings came to market,” said Ratiu. “As more markets continue to normalize this year, I expect to see more options for buyers and more approachable prices in the months ahead.”
The prevailing patterns in 2022 will probably be mixed and reflect an uneven return to pre-pandemic conditions. Areas that are historically hot, or that have become so during the pandemic, will take longer to get there.
In effect, some of the country will continue to see outrageous price growth while other metros — and more of thon balance — will begin to come back down to earth or at least stop rising as quickly as they have.
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