Editor’s Note: By 2020, forecasts for the national median home price are set to increase to $350,900, up from the median of $299,600 for 2017. CNN’s Taniza Hyman contributed to this story.
By Taniza Hyman , CNN Contributor
NEW YORK (CNNMoney) — The housing market is slowly picking up steam, but not before the price of a home starts ballooning.
An analysis of Fannie Mae data for a sample of the largest metro areas found home prices rose at the fastest pace since 2005 in some cities, the largest rise in more than a decade. Meanwhile, prices were the lowest level in a decade in others.
Fannie Mae made the calculations by comparing home prices in April 2017 to those in April 2018.
Higher home prices help families buy a bigger house or move into bigger homes that they can’t afford now because prices are high. And they’re helping to drive the economy as the growth of the housing market supports consumer spending and hiring,
But home prices going up at these rates is a problem.
Pools of affordable homes in the United States are dwindling thanks to limited supply and high prices. Americans aren’t buying homes as often, which is contributing to the rising inventory of homes on the market, but they’re not selling any of their homes at a healthy rate either.
The CNNMoney report includes 20 large metro areas, ranging from Indianapolis to New York, Miami to Sacramento. All of the top 15 metro areas have inventory shortages with an average of just 25% of all homes currently available for sale. Those cities include Dallas-Fort Worth, Denver, Orlando, Atlanta, Austin, Baltimore, Boston, Washington D.C., Miami, Detroit, and Pittsburgh.
These cities are constrained by high prices, longer commutes, and other issues that aren’t easy to fix. The metro areas that reported shortages of both supply and price had an average median home price over $400,000. Nationally, the median was $313,800.
Homes are also hard to come by in several of the biggest cities, especially because they’re prone to boom and bust cycles.
For example, some of the biggest cities in California have suffered from overbuilding in the past. This has happened in several spots in California including San Jose, San Francisco, and Los Angeles. In an effort to slow down the speculative building, stricter state regulations were put in place, and now projects are getting built more slowly. But the regulations still face strong opposition from certain developers, which could slow down the process even more.
“It’s problematic,” and “the problem won’t be solved in a few years, it will be solved in a decade,” said John Kim, president of the Evergreen Group, a San Francisco-based real estate investment company.
In a case of the fast and the furious, the chart below from Fannie Mae shows home prices rapidly appreciating over the years in some places, especially San Francisco. But the picture is different there now. San Francisco’s home prices hit a peak in July 2007 at $617,900 and fell 5.4% by March 2012 to $544,900. Since then, prices have gained about 60% to $893,000 today.
The most recent report from the S&P CoreLogic Case-Shiller indexes show price gains moderating.
Last month, it estimated home prices will rise 3.9% in 2018. On May 14, it downgraded its 2018 forecast from 5.5% due to slower-than-expected consumer spending and business investment.