US Home Prices: Northeast and Midwest Gains Offset Declines in South and West

While home prices fell annually in nearly a quarter of US metropolitan areas in the third quarter, strong growth in the Northeast and Midwest led to a national price increase of 2.2%. This analysis, based on the latest National Association of Realtors® (NAR) data, reveals a clear regional divide, with supply levels being the primary driver. The key takeaway is that the national housing market remains resilient, but localized conditions vary dramatically.

Why Are Home Prices Falling in Some Regions but Rising in Others?

The disparity is primarily a story of housing supply. According to the NAR's quarterly report, which tracks sales that closed in July, August, and September, prices declined in 51 out of 221 metro areas. These declines were heavily concentrated in the South and West, including markets like Reno, NV (-3.6%), Boulder, CO (-3.3%), and Tampa, FL (-2.4%).

NAR Chief Economist Lawrence Yun attributes this to robust new-home construction in states like Texas and Florida in recent years. "Ample supply in the South and West has eased pressure on home prices," he states. This increased inventory gives buyers more choices and moderates price growth. However, economic analyst Hannah Jones clarifies that "prices in the South and West remain near record highs, so buyers there aren’t necessarily finding bargains."

In contrast, the Northeast and Midwest are experiencing supply constraints. This limited inventory, coupled with strong demand, continues to push prices higher. Markets like Trenton, NJ (9.9%), Lansing, MI (9.8%), and Long Island, NY (9.4%), saw the strongest annual gains.

What Do the Current Mortgage Payments Look Like for Buyers?

For a typical home purchase in the third quarter with a 20% down payment, the median monthly mortgage payment was $2,187. This represents a slight decrease from the previous quarter but is 2.1% higher than a year ago.

The report also breaks down the financial impact on different buyer types:

• The average homeowner is spending 24.8% of their income on mortgage payments, a slight improvement from 25.2% a year ago due to rising incomes.
• First-time buyers faced a typical mortgage payment of $2,146 on a starter home valued at $362,800 with a 10% down payment. They are spending 37.4% of their income on housing, a small decrease from 38.1% last year.

Is Now a Good Time for Buyers in Markets with Falling Prices?

Lawrence Yun suggests that price declines in Southern states should be viewed as a temporary adjustment. "Given the region’s faster job growth, these price drops should be viewed as temporary and as a second-chance opportunity for those previously priced out of the market," he notes. This indicates that for well-qualified buyers in these regions, current conditions may present a window of opportunity before potential price rebounds.

However, buyers must carefully assess their personal finances. Despite the slight national decline in payment-to-income ratios, housing affordability remains a significant challenge, especially for first-time buyers. A separate NAR report highlights that the typical first-time homebuyer is now 40 years old, a record high, and this group accounted for just 21% of all purchases this year.

In summary, the US housing market is characterized by significant regional variation. Your experience as a buyer or seller is highly dependent on location. Key advice includes:

• Focus on local market data rather than national headlines.
• Understand that price declines in high-supply areas may be a short-term phenomenon driven by new construction.
• Carefully budget for monthly payments, which remain high despite slight recent improvements in affordability.