Affordable homes in the US have gotten pricier last month, and prices have not stopped rising for the past couple of years.
June saw an 8.7% year-over-year increase in the prices of the most affordable third of homes sold, according to a recent report from Redfin. The price gain hasn’t dropped below 4.5% in at least seven years as the supply of most affordable homes plunged 14.5% annually.
Even the prices of homes in the most expensive third experienced year-over-year growth of 1.1%. However, the supply for the most expensive group went up 9.7% and has been climbing on an annual basis since 2013. Meanwhile, supply for the most affordable set kept sliding by double digits in most months every year since 2012.
The fast price gain of the most affordable segment signals that the housing affordability crisis has escalated in several parts of the country, according to Redfin. Memphis (-6.6%), San Jose (-3.8%), and Orange County (-2.6%) were the only metro areas that did not see a price hike in June. In fact, supply for affordable homes in San Diego and Orange County skyrocketed 94.1% and 24.5%, respectively.
"I've been feeling a slowdown in the Bay Area the past few months. The beginning of summer feels like the end of summer usually does, with prices coming down and inventory up," said San Jose-based Redfin agent Chad Eng. "The cooldown is more pronounced in specific parts of the area, specifically greater San Jose."
Redfin Chief Economist Daryl Fairweather said that the prevalent home-price growth in other metros is stirring trouble for working- and middle-class buyers.
"Now that the economic expansion is in its 10th year, some working- and middle-class Americans are finally starting to see wage increases significant enough to ready them (to) buy their first homes," Fairweather said. "But economic growth is a double-edged sword for the housing market. The increase in demand for low- and moderately priced starter homes is pushing up prices for the most affordable segment of the market. Over the next few years, prices for the most affordable homes are likely to continue growing rapidly, pushing homeownership further out of reach for people with lower incomes."