Weekly Economic Trends and Indicators
The Headline:
The National Association of Realtors recently released their local market report for the first quarter of 2024 for the Davenport-Moline-Rock Island metro area. In the four-county area, the median home price for the first quarter was $168,600, which was up 14.9% over the previous year. The three-year growth locally averaged approximately 6.2% per year. There were 432 building permits for 1-unit buildings in the metro area over the four quarters ending in March. This is above the average over the last eight years (362), and approaching the levels seen in 2022.
The Details:
The Quad Cities housing market continues to be more affordable than other parts of the country, though recent trends show mortgage payments taking a larger portion of median income. Historically, the ratio of average mortgage payments to median family income has been about 8.6% in the Quad Cities compared to 17% for the U.S. That ratio was 12% in the first quarter for the Quad Cities compared to 23.7% for the U.S. The rise is due to both the appreciation in housing values and the increase in mortgage rates relative to a few years ago. There was a slight decrease both locally and nationally compared to 2023 as average mortgage rates moderated.
The ratio of the median home price to median family income remained stable in the quarter. In the Quad Cities, the median home price was about 1.9 times median family income (historical average 1.8). For the U.S., that ratio was 3.8 (historical average 3.4). As we have noted in the past, not only are homes more affordable here, housing values and incomes have moved more closely together here. This has kept homes in the Quad Cities affordable over time even as home prices have far outpaced income growth in other parts of the country.
The Context:
Compared to the fourth quarter of 2023, the first quarter showed improvement in housing prices. Looking ahead, there are several factors that will affect both demand and supply over the short to medium term. The most significant change in market conditions today compared to a year ago is the softening labor market. Payroll employment has decreased locally compared to last year, and recent layoffs have yet to be fully reflected in the data. Lower employment will mean lower demand for homes and slow the trend in appreciation.
On the other hand, the anticipated interest rate cuts from the Federal Reserve could have a positive impact on demand. However, this is mainly dependent on the timing of the cuts as they have been largely priced into mortgage rates already.
On the supply side, the increase in building permits is encouraging, and if it can be sustained this will keep prices from rising too quickly. Although permits have been more volatile since the pandemic, the trend has been up recently, which bodes well for the future of the market.
Next week: National labor market update
