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US home prices rose 15 percent in fourth quarter

US home prices rose 15 percent in fourth quarter
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The median sale price of a single-family home rose 14.9 percent to $315,900 in the year since the fourth quarter of 2020 as the coronavirus pandemic fueled a record-breaking housing market boom, according to data released Thursday by the National Association of Realtors (NAR).

Every metro area tracked by NAR saw home prices rise over the past year, and 88 percent of metro areas saw double-digit price increases, said NAR chief economist Lawrence Yun.

"The fourth quarter of 2020 presented circumstances ripe for home price increases," Yun said.

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Home prices have skyrocketed since spring thanks to a combination of floor-low interest rates, the widespread adoption of teleworking and a housing shortage exacerbated by the pandemic. 

Office and school closures have prompted a surge of demand for larger homes among those who can afford them, and interest rate cuts by the Federal Reserve helped drive down mortgage costs. Purchases in popular vacation areas also shot up amid the rise of teleworking.

At the same time, COVID-19-related restrictions and uncertainty slowed home construction, which has lagged behind demand for years.

"Mortgage rates reached record lows, thereby driving up the demand," Yun said. "At the same time, inventory levels also reached record lows, leading to grim inventory conditions of insufficient supply in the fourth quarter."

The sharp rise in home sales has been a boon for homeowners and those able to afford a housing upgrade. But the steep increase in prices could pose severe challenges for those who may need or want to purchase a home but lack the financial capacity to pull it off.

Millions of Americans who have relied on federal foreclosure protections and forbearance plans to avoid homelessness may also find it harder to secure a mortgage with lending standards tightening amid falling rates. 

"The average, working family is struggling to contend with home prices that are rising much faster than income," Yun said. "This sidelines a consumer from becoming an actual buyer, causing them to miss out on accumulating wealth from homeownership."