Good ol’ economics – housing demand continues to outpace supply, and bidding wars are now common in many cities. On a national scale, affordability is increasingly threatening many peoples’ ability to buy, based on their income.
The realtor.com and National Association of Realtors joint report, the Realtors Affordability Distribution Curve and Score, examines affordability conditions compared to income levels for active inventory in local markets. Higher scores suggest a particular market has more affordable homes in proportion to local income levels.
It’s no surprise that in March, the report indicates the least affordable (in proportion to income) is Hawaii, California, Oregon, the District of Columbia, Montana, and Rhode Island. In these states, households at the median income level can only afford 19 to 23 percent of the active housing inventory.
In contrast, the most affordable states are Ohio, Indiana, Kansas, Iowa, and West Virginia, where a a typical household can afford 54 to 62 percent of all active inventory.
The report also indicates that more local markets are seeing worse affordability conditions compared to last year, with L.A., San Diego, San Jose, Ventura, and San Francisco leading the pack. In these markets, the typical household can only afford 3.0 to 11 percent of homes available for sale in their markets.
The typical household can afford nearly 75 percent of homes for sale in Dayton, OH, Toledo, OH, and Scranton, PA.
NAR’s Chief Economist, Dr. Lawrence Yun stated, “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.”
The report makes even more apparent why first-time buyers “struggle finding affordable properties to buy and are making up less than a third of home sales so far this year,” said Dr. Yun.
Although wages are on the rise, housing prices are outpacing these increases, and Dr. Yun points to the solution being “more homeowners selling, investors releasing their portfolio of single-family homes back onto the market and more single-family housing construction.”