These Metro Areas Had 2022’s Highest Home Price Gains

Are high rates on mortgage loans going to cause a bubble to burst in housing prices? Not if you go by the late 2022 numbers. The year-end data shows home prices are still on the rise despite interest rates being near-double what they were a year ago. Let’s look at where housing prices were hot in 2022 and where the market might be heading in 2023.

Median home prices up 4% nationwide

According to the National Association of Realtors, in the final quarter of 2022, single-family home prices increased in almost nine out of 10 metro areas–166 of the 186 metro areas the researchers analyzed. Overall, the nationwide median price of a single-family existing home increased by 4% from the previous year, climbing to $378,700.

The South leads in home price gains

Most striking was how these home price increases seemed to be everywhere. The largest jumps came in the South, where single-family existing-home sales took up 45% of all sales in the market during the third quarter of 2022. This indicates high demand, which puts upward pressure on housing prices. Prices also increased in the Northeast, at 5.3%. The West reported the slowest increase at only 2.6%.

Let’s zoom into the metro areas. Our home states of North Carolina and South Carolina are featured multiple times in the list of metro areas with the highest year-over-year (YOY) price increases:

• Farmington, New Mexico (20.3%)
• North Port-Sarasota–Bradenton, Florida (19.5%)
• Naples-Immokalee-Marco Island, Florida (17.2%)
• Greensboro–High Point, North Carolina (17.0%)
• Myrtle Beach–Conway-North Myrtle Beach, South Carolina / North Carolina (16.2%)
• Oshkosh-Neenah, WI (16.05%)
• Winston-Salem, North Carolina (15.7%)
• El Paso, Texas (15.2%)
• Punta Gorda, Florida (15.2%)

Of the top ten markets for price gains, only two of the metropolitan areas were outside the southeast: New Mexico and Wisconsin.

Price gains, but still more affordable

Meanwhile, South Carolina and North Carolina housing markets did not factor into the metropolitan areas with the most expensive homes overall. Half of the top ten were areas in California, showing just how high housing prices have become in many places on the west coast.

Coming in at number one: San Jose-Sunnyvale-Santa Clara, California. There, the median existing-home price of $1,577,500 was actually down 5.8%, in contrast to the fast-growers throughout the southeast.

This highlights another key aspect of the list. Though the housing market was hot in 2022, that doesn’t mean every metropolitan area is seeing the same outcomes. In 11% of markets or 20 of the 186, home prices declined during the fourth quarter of 2022. That included the aforementioned San Jose-Sunnyvale-Santa Clara area, near California’s famous “Silicon Valley.” After months of growth, these markets may be experiencing price corrections.

Price growth exceeds inflation

Though NAR Chief Economist Lawrence Yun said a slowdown in home price growth already appears in 2023, 2022’s fourth-quarter results highlight how slow the market can react to pressures like higher interest rates. In fact, Yun noted that the cost of housing has even surpassed wages and CPI (consumer price inflation) since 2019. In other words, the price of homes went up so fast that it’s been beating other economic sectors.

Why Did Home Prices Go Up to End 2022?

2022’s headlines centered around dramatic changes in the affordability of living costs. Gas prices ballooned, for example. CPI went up, and the cost of groceries (including staples like eggs) exploded. Housing price increases were part of a market-wide reaction to inflation, lingering supply chain issues, and demand.

The Federal Reserve raised interest rates seven different times in 2022. Four occasions saw interest rates increase by 0.75%, much steeper than the more typical 0.25% or 0.50% movements. After all, 2022 saw some of the steepest increases in interest rates in a long time.

Mortgage rates rose steadily in lockstep with these increased interest rates. That made home loans less affordable to many home buyers. Consider just how drastic these rate increases were. In January 2022, a 30-year fixed mortgage rate was around 3.2%. By November, that number hit over 7%, more than doubling in less than a year.

With those rate increases comes a decline in affordability. Higher mortgage rates mean the cost of acquiring a home loan is much more expensive in both the short- and long-term. Not only do higher mortgage rates affect the monthly payment, but they can substantially increase how much money the buyer spends on the home throughout the 30-year mortgage term.

Yet home prices continued to go up at the end of 2022. What’s happening here?

For starters, real estate tends to move less quickly than prices at the supermarket. An egg manufacturer can mark up their weekly prices based on supply and expenses. But it takes two parties to agree to a real estate purchase. An existing home is complicated to sell at times, and it requires financing from the buyer. That’s why 2023 may finally see the effects of these interest rate hikes hitting the market.

The NAR report highlighted some of these challenges at the end of the fourth quarter of 2022. For example, housing affordability started to show signs of cracking. As NAR noted, a home that sells for $312,900 with a 10% down payment would cost about $1,931 in monthly mortgage payments. That number was up 7% from the previous quarter when the number stood at $1,806. Compared to the prior year, the figure was up nearly $700, a startling 57% rise.

South likely to see price growth continue

The only question is which metropolitan areas might be most affected by slowing price gains. And if this report suggests anything, it’s that home prices remain hot in the southeast, even if their price growth slows.