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  • Housing Affordability Is Improving, Slightly

    June 24, 2016
  • Eighteen percent of U.S. housing markets were less affordable than normal in the second quarter of 2016. That’s down slightly from affordability levels a year ago, when 20 percent of markets exceeded their normal affordability levels according to RealtyTrac.

    Their housing affordability index is based on the percentage of average wages required to make monthly house payments on a median-priced home with a 30-year fixed-rate mortgage and a 3 percent down payment (including property taxes and insurance).

    Of the 417 counties they studied, 74 had an affordability index below 100 in the second quarter, which means buying a median-priced home was less affordable than the historically normal level for the county dating back to the first quarter of 2005.

    “Although nearly one in five U.S. housing markets was not affordable by historic standards in the second quarter, the good news is that affordability is improving compared to a year ago in the majority of markets thanks to a combination of slowing home price appreciation and accelerating wage growth, along with falling interest rates,” says Daren Blomquist, senior vice president at RealtyTrac. “The average interest rate on a 30-year fixed rate mortgage is down 37 basis points from a year ago, while annual wage growth accelerated compared to a year ago in 72 percent of the markets we analyzed and annual home price growth slowed compared to a year ago in 68 percent of the markets, including bellwether markets such as Los Angeles County, Miami-Dade County, Brooklyn, Dallas County, and San Francisco County.”

    In San Francisco County, for example, annual home price appreciation slowed to 2 percent in the second quarter compared to a whopping 21 percent in the second quarter of 2015, even while annual wage growth increased from 5 percent to 6 percent, Blomquist notes.

    “Affordability constraints are beginning to rein in home price appreciation even while wage growth is gaining speed in an increasing number of markets,” Blomquist says.

    The following markets are the most affordable by the absolute standard of percentage of wages needed to purchase a median-priced home, according to RealtyTrac’s report: Clayton County, Ga., in the Atlanta metro area (10.4 percent of average weekly wages to buy a median-priced home); Wayne County, Mich., in the Detroit metro area (10.9 percent); Baltimore City, Md. (11.6 percent); Bay County, Mich., in the Bay City metro area (12.3 percent); and Rock Island County, Ill. in the Davenport-Moline-Rock Island metro area (12.4 percent).

    Source: RealtyTrac