Issues surrounding supply levels and affordability in many US metros is getting worse, with more showing a decline than an improvement.
A new joint-study by the National Association of Realtors and Realtor.com shows that, out of the metros analyzed, affordability worsened in 45 and improved in 34.
The study looked at mortgage, income data, and listings on Realtor.com, and ranked markets on the Realtors Affordability Distribution Curve and Score, with a score of 1 or more generally meaning that homes for sale are more affordable to households in relation to their income distribution.
The markets with the lowest affordability scores include Los Angeles-Long Beach, California (0.35), San Diego-Carlsbad, California (0.37), San Jose-Sunnyvale, California (0.43), Oxnard-Thousand Oaks-Ventura, California (0.45) and San Francisco-Oakland, California (0.48), where a typical household can only afford 3-11% of the active housing inventory.
Meanwhile, the Youngstown-Warren, Ohio-Pennsylvania market had the highest Affordability Score at 1.25, followed by Dayton, Ohio (1.19), Toledo, Ohio (1.18), Akron, Ohio (1.16), and Scranton-Wilkes-Barre, Pennsylvania (1.11). In these areas, the typical household can afford nearly 75% of the homes that are currently on the market.
“The survey confirms that the lack of entry-level supply is putting affordability pressures on too many buyers – especially those at the lower end of the market, where demand is the strongest,” said NAR chief economist Lawrence Yun. “This is why first-time buyers continue to struggle finding affordable properties to buy and are making up less than a third of home sales so far this year.”
Mortgage rates, prices hampering affordability
Rising prices are outpacing rising incomes, and mortgage rates are also rising, reducing the chance of closing the affordability gap.
“Wages are growing, which is welcome news for prospective buyers, but prices are increasing at a faster rate, up almost 6% in the first two months of 2018. Solutions to improve these conditions include more homeowners selling, investors releasing their portfolio of single-family homes back onto the market and more single-family housing construction,” Yun said.
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