Home prices made their biggest jump in four years in March, up 7 percent compared with March 2017, according to CoreLogic, which also calculated that half of the nation’s 50 largest metro markets are now considered overvalued. That is based on prices being at least 10 percent higher than the long-term sustainable average.
While more Americans are less concerned about losing their jobs, just 18 percent said their household income is significantly higher than it was a year ago, according to the Fannie Mae survey. While that is a slight gain compared with March, it doesn’t exactly mean potential buyers are swimming in cash. Home prices are rising far faster than incomes.
Demand, however, continues to rise as the largest generation, millennials, moves solidly into the homebuying years. While supply is lowest on the low end of the market, a growing number of first-time buyers are buying move-up homes, instead of entry-level homes. That is because millennials waited longer, following the recession, to become homebuyers, meaning they are likely in higher-paying jobs than previous generations of first-time buyers.
Still, if mortgage rates continue to rise, fewer millennials will be able to afford homeownership, and will keep renting or living with family. Millennial homeownership actually fell in the first quarter of this year, after rising solidly during all of 2017, according to the U.S. Census. High prices are clearly taking their toll.