Supply is cooling home prices, but builders still need to add stock
While property values continued rising in most markets, they grew at a healthier pace for homebuyers, according to the National Association of Realtors. Still, affordability remains a top consumer challenge, and homebuilders can help by adding housing stock to further cool costs.
About 92% of measured metropolitan areas realized home price gains year-over-year in the fourth quarter, with 14 housing markets seeing double-digit growth, which is down from 18 the previous year.
In addition to slowing price appreciation, the median household income grew to $77,392 in the fourth quarter, but higher home prices and growing mortgage rates still pushed down affordability.
A purchaser buying a house with a 5% down payment at the national median home price would need an income of $62,954 to afford it, according to NAR.
Modifying local zoning laws, promoting tax breaks for developers and expanding construction worker training programs at trade schools can ensure healthier supply levels in the future, according to NAR Chief Economist Lawrence Yun.
"Housing affordability will be the key to sustained healthy growth in the housing market in the upcoming years. That requires more homebuilding of moderately priced homes," Yun said in a press release.
"Housing starts fell far short of historically normal levels, with only 9.6 million new housing units added in the past decade; compared to 15 million to 16 million that would have been needed to meet our growing population and 20 million new job additions," he continued.
The West Coast, in particular, is suffering most, and could benefit from more homes being built.
"The West region, where home prices have nearly doubled in six years, is undergoing the biggest shift with the slowest price gain and large buyer pullback," said Yun.
In terms of existing-home supply, there were 1.55 million houses on the market at the end of the year, which is up from 1.46 million at the end of 4Q17. Still, existing-home sales declined 7.4% over that same period, likely due to affordability declines.