Affordability Vanishing in Prime Markets!

Affordability Vanishing in Prime Markets! 

If you want to live in one of the major metro areas across the country, you might be noticing that buying into the most popular neighborhoods is no longer feasible as the market has now corrected itself to the point that affordability is now becoming a major issue in many major markets. Some families have begun to dedicate huge portions of their monthly income to housing nowadays! Over the last several years when prices were up to 30% lower in some areas, people were able to purchase homes in areas they could only dream of only a few years prior. But now, as home prices have appreciated tremendously at a rapid rate, people's incomes have not increased along with property values so many people find themselves priced out of the market and begin looking to move out beyond the suburbs even to find affordable housing. 

Affordability Vanishing in Prime Markets! 

One commonly held rule of thumb for American homebuyers is that families should devote no more than about 28 percent of their incomes to housing. But in certain parts of the country, that's easier said than done. By the end of last year, the median family would need to devote much more than a third — up to nearly forty percent — of its income to mortgage payments on the median home in metros like San Jose (36 percent); San Francisco (39 percent); and Los Angeles (40 percent). These proportions are even higher than in the pre-bubble, pre-crash period of 1985-2000, when the median household would have needed to devote still substantial percentages of its income to afford the median house: 32 percent in New York; 35 percent in Los Angeles; 35 percent in San Jose; and 38 percent in San Francisco.

Affordability Vanishing in Prime Markets! 

I actually welcome any conditions that will help slow down the recovery to a more sustainable pace. We need to see the housing market stabilize and slowly grow rather than the craziness we saw last year in order for prices to continue heading in the right direction. Rates are up as well as prices so I expect we might see a leveling off in 2014 following the market frenzy we saw last year!