Home Prices Climb in 90% of U.S. Metros, with Silicon Valley Leading the Surge

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In the second quarter of 2024, nearly 90% of U.S. metro areas witnessed a rise in single-family existing-home sale prices, continuing the trend of rising home values despite a slight dip from the 93% recorded in the previous quarter. The National Association of Realtors (NAR) reported on Tuesday that the median single-family home price grew 4.9% year over year, reaching $422,100, as 30-year fixed mortgage rates fluctuated between 6.82% and 7.22%.

Silicon Valley Hits a New Milestone

San Jose, California, a key tech hub in Silicon Valley, became the first U.S. metro to see its median single-family existing-home price surpass the $2 million mark since NAR began tracking home prices in 1979. The median price in San Jose reached $2.008 million, reflecting the area’s soaring demand and limited supply.

Nationwide Trends and Regional Variations

While the South accounted for the largest share of single-family home sales at 45.5%, with a modest 2.3% price increase, the Northeast led in price growth, with a 9.8% year-over-year increase. The Midwest and West saw gains of 5.5% and 5.4%, respectively.

Five of the ten metro areas with the highest annual price growth were located in the Northeast, with Racine, Wisconsin, and Glens Falls, New York, each seeing a 19.8% increase. Other top-performing markets included El Paso, Texas (19.2%), and Morristown, Tennessee (16.7%).

California continued to dominate as the priciest state, with seven of the top ten most expensive markets, including San Francisco-Oakland-Hayward ($1.45 million) and Anaheim-Santa Ana-Irvine ($1.44 million). Urban Honolulu, Hawaii, and San Diego-Carlsbad, California, also featured among the top five with median prices exceeding $1 million.

Challenges for Homebuyers and Market Outlook

The second quarter saw a rise in the number of markets posting home price declines, with nearly 10% of markets experiencing decreases, up from 7% in Q1 2024. Previously hot markets like Nashville, Durham, Austin, and several Florida metro areas saw prices stabilize, while markets like San Francisco, Anaheim, and New York rebounded after declines last year.

Rising mortgage rates continued to squeeze affordability. The monthly mortgage payment for a typical single-family home increased by 11.1% from the previous quarter to $2,262, requiring families to spend 26.5% of their income on mortgage payments, up from 24.2% in the first quarter of 2024. First-time buyers were particularly hard-hit, with mortgage payments on a typical starter home rising to $2,218, consuming 40% of their income.

The income required to qualify for a mortgage with a 10% down payment exceeded $100,000 in nearly half of all markets, up from 40.7% the previous quarter. Conversely, only 2.7% of markets had homes affordable to families earning less than $50,000, down from 4.5%.

Future Prospects

Despite the challenges, NAR Chief Economist Lawrence Yun expressed optimism about the future. He noted that as mortgage rates decline and more homes enter the market, housing affordability is expected to improve, making it easier for more families to enter the housing market.