[ad_1]
Home buyers at many income levels likely will see an inadequate amount of homes for sale in their price range in the coming months, according to a new housing affordability model created by the National Association of REALTORS® and realtor.com®.
The new Affordability Distribution Curve—which culls data from mortgages, state-level income, and listings on realtor.com®—examines how many listings are affordable to those in a particular income percentile. In January, it was below the equality line, and the gap was generally wider at lower incomes, which indicates tight supply conditions. For example, a household in the 35th percentile could afford 28 percent of all listings, while a household in the 50th percentile could afford 46 percent. A household in the 75th percentile could afford 74 percent of active listings.
“Consistently strong job gains and a growing share of millennials entering their prime buying years is laying the foundation for robust buyer demand in 2017,” says Jonathan Smoke, chief economist at realtor.com®. “However, buyers with a lower maximum affordable price are seeing heavy competition for the fewer listings they can afford. At a time of higher borrowing costs, this situation could affect affordability even more as buyers battle for a smaller pool of homes and bid prices upward.”
NAR and realtor.com®’s Affordability Score also accentuates the disjointed rate of accessible supply on the market across the country. Increasing price growth and higher mortgage rates caused January’s Affordability Score to shrink from a year ago, nationally as well as in many states.
“Home prices have ascended far past wage growth in much of the country in recent years because not enough homeowners are selling, and home builders have not boosted production enough to meet rising demand,” says NAR chief economist Lawrence Yun. “NAR and realtor.com®’s new affordability measure confirms that buyers aren’t exaggerating about the imbalance. Amidst higher home prices and now mortgage rates, households with lower incomes have been able to afford less of all homes on the market last year and so far in 2017.”
The following states last month had the highest Affordability Scores (a metric which ranges from zero to 2): Indiana (1.23), Ohio (1.22), Iowa (1.18), Kansas (1.17), and Michigan and Missouri (both at 1.14). The states with the lowest Affordability Score were Hawaii (0.52), California (0.60), District of Columbia (0.65), and Montana and Oregon (both at 0.67).
“This shortfall of inventory at a time of healthy job gains in most states is one of the biggest reasons for the depressed share of first-time buyers and the inability for the homeownership rate to rise above its near-record low,” says Yun. “The only prescription to reversing this adverse situation is to build more entry-level and mid-market housing that aligns with current household incomes.”
Source: National Association of REALTORS®
[ad_2]
Source link
