A few less Americans were able to purchase their home and fulfill the purported American Dream according to the National Association of Home Builders.
Nearly 74% of the new and existing homes sold in the three months ended June 30 were affordable to families who earn the national median income of $65,000, according to the National Association of Home Builders (NAHB) and Wells Fargo. That's down from 77.5% three months earlier, but is still considered a high level of affordability. It is believed that rising prices were responsible for the decline in affordability.
Median home prices were up in 92% of the markets surveyed, while median income did not go up. It is interesting to note that this decline came despite record low mortgage rates. The 30-year fixed rate averaged almost 4% at the end of March and dropped to 3.66% by the end of June, according to Freddie Mac. But that wasn't enough to offset price increases and stagnant wages.
According to the report, among major housing markets, Youngstown, Ohio had the most affordable prices. In town, 93.4% of homes sold could be comfortably purchased by residents with the typical family income of $55,700. The leader among smaller housing markets was Fairbanks, Alaska, where 98.7% of homes sold were affordable for the average household. Other bargain markets include Mansfield and Springfield, Ohio, Carson City, Nev., and Kokomo, Indiana. The New York metro area was the least affordable market, with only 29.4% of homes within reach of the average family. The least affordable small markets were Ocean City, N.J., San Luis Obispo, California, Santa Cruz, California, Dover, Delaware and Santa Barbara, California.
There are those who see the decline in affordability as a positive sign for the market. Why, you might ask? Well, they see it as yet another signal that the housing recovery is starting to take root and giving the much needed confidence to prospective buyers and sellers who have been holding off until the market improves. As those prospective buyers and sellers regain confidence to participate in the real estate housing market, the natural volume of transactions will increase which will in turn have a trickle-down effect throughout the economy in the form of employment, income and neighborhood growth/revitalization.
Michael Hobbs, SRA PahRoo Appraisal & Consultancy