RealtyTrac: Lack Of Home Affordability A Growing Problem

Homes are less affordable, on average, than they were 14 years ago; however, there are many counties where affordability as it relates to median income has remained more or less flat since 2000, according to a report from RealtyTrac analyzing affordability in more than 1,100 counties nationwide.

The report shows that, as of the second quarter, one-third of the counties analyzed have surpassed their historical averages for income-to-price affordability percentages since 2000.

RealtyTrac arrived at its findings by taking the percentage of median income needed to make monthly payments on a median-priced home in each county in May 2014 and combining that with the historical trend in each county's income-to-price affordability percentage going back to January 2000.

The report also takes into account the impact of rising interest rates on affordability, calculating the percentage of median income needed to make payments on a median-priced home if interest rates rise by a quarter percentage point, a half percentage point, three-quarters of a percentage point or a full percentage point.

‘The good news is that none of the nearly 1,200 counties we analyzed for the second quarter has regressed to the dangerously low affordability levels reached during the housing price bubble, and even if interest rates increased 1 percentage point, only 59 counties representing 2 percent of the U.S. population would be at or above bubble levels in terms of affordability,’ says Daren Blomquist, vice president at RealtyTrac, in a statement. ‘But the scales are beginning to tip away from the extremely favorable affordability climate we've seen over the last two years, with one-third of the counties analyzed – representing 19 percent of the total population in those counties – now less affordable than their long-term averages.

‘Still, 81 percent of the U.S. population lives in markets where the percentage of income needed to purchase a median-priced home is at or below its long-term average,’ Blomquist adds. ‘Buyers looking for markets with a combination of affordable housing and a good job climate will find those mostly in the middle of the country, in places such as Columbus, Ohio, Oklahoma City, Omaha, Des Moines and Minneapolis, all of which have counties where 20 percent or less of the median income is needed to buy a median-priced home and where unemployment rates are 5 percent or lower.’

Of the 1,194 counties with data, 793 had an income-to-price affordability percentage that was below the historical average for that county – meaning the county was more affordable for buyers than it has been on average over the past 14 years. Meanwhile, 401 counties had an income-to-price affordability percentage above the historical averages for that county.

Counties categorized as ‘inherently unaffordable’ included vacation home markets like Nantucket County, Mass.; Teton County, Wyo. and Pitkin County, Colo., along with four out of the five boroughs in New York City; San Francisco County; and Los Angeles County.

On the other end of the spectrum, there were 831 counties with an average historical income-to-price affordability percentage of 15% or less. Counties in this ‘consistently affordable’ category included Wayne County, Mich.; Marion County, Ind.; Monroe County, N.Y.; Baltimore City, Md.; and Montgomery County, Ohio.

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