Home Buyers Rushed In as Rates Rose, Boosting Prices Across U.S.

Home prices continued to surge in virtually every corner of the U.S. during the first quarter as mortgage rates rose rapidly, according to a Tuesday report from the National Association of Realtors.

Many buyers rushed to lock in purchases in the first quarter before rates climbed even higher, according to real-estate agents.

“The housing market remains very active right now,” said Nick Bailey, chief executive of Re/Max LLC, on a Re/Max Holdings Inc. earnings call last week. “Buyers are rushing to beat anticipated mortgage rate hikes.”

With the average 30-year mortgage rate rising to 5%, homeownership may now be out of reach for millions more Americans. WSJ’s Dion Rabouin explains the impact for potential buyers, sellers and the housing market. Illustration: Adele Morgan

The median sales price for single-family existing homes was higher in the first quarter compared with a year ago in 181 of the 185 metro areas tracked by the NAR, the association said Tuesday. The current housing boom has been geographically widespread, with most metro areas in the country posting robust home-price growth in the past two years.

Home prices and mortgage rates have climbed simultaneously in recent months, raising costs for home shoppers and prompting some to reduce their budgets or drop out of the market. But demand continues to outpace supply, and a persistent shortage of homes for sale is still prompting bidding wars among buyers and pushing prices higher.

Nationwide, the median single-family existing-home sales price rose 15.7% in the first quarter from a year ago to $368,200, the NAR said.

While mortgage rates have risen at their fastest pace in 35 years, double-digit price gains persisted in most of the country during the first quarter. Median prices rose by at least 10% from a year earlier in 71% of the 185 metro areas, an acceleration from the fourth quarter, when 67% of metro areas reported double-digit-percentage growth.

The average rate on a 30-year fixed-rate mortgage rose from 3.1% at the end of 2021 to 5.1% last week, near the highest level in more than a decade, according to mortgage-finance giant Freddie Mac.

Rising home prices and mortgage rates have made homeownership less affordable. In the first quarter, the typical monthly mortgage payment for a single-family home rose to $1,383, from $1,064 a year earlier, the NAR said.

Economists expect rising mortgage rates to lead to slower home-price growth by the end of the year. Prices can be slow to respond to changes in buyer activity because sellers often wait weeks before dropping their list prices. Some buyers are also less sensitive to rising rates, such as cash buyers or those moving from high-cost markets to more affordable ones. Homes typically go under contract a month or two before the contract closes, so the first-quarter data largely reflects purchase decisions made in late 2021 or the beginning of the first quarter.

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The ability for some households to work remotely continues to spur home-buying demand. Millions of millennials are also aging into their prime home-buying years.

The Punta Gorda, Fla., metro area posted the strongest median-price increase in the first quarter, up 34.4% from a year earlier.

Following Punta Gorda was the Ocala, Fla., metro area, up 33.8%, and Ogden, Utah, up 30.8%.

The only metro areas to post declines in the first quarter from a year earlier were Cape Girardeau, Mo., where median prices fell 2%, Topeka, Kan., down 1.9%, and Rockford, Ill., down 1%, the NAR said. Prices were unchanged in Bismarck, N.D.

News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.