Housing affordability has fallen in the last year and fewer households are able to afford the inventory of homes for sale based on their incomes, according to joint research released Wednesday by the National Association of REALTORS® and realtor.com®.
Read more: Study: ‘Affordability Crisis’ Is Worsening
The REALTORS® Affordability Distribution Curve and Score examines affordability conditions at different income levels for all active inventory on the market. A score of one or higher suggests a market where homes for sale are more affordable to households in proportion to incomes.
“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,” says Lawrence Yun, NAR’s chief economist. “This is why first-time buyers continue to struggle to find affordable properties to buy and are making up less than a third of home sales so far this year.”
Rising home prices and an increase in mortgage rates caused Affordability Scores to drop nationally between March 2017 and March 2018.
However, 14 states had better affordability compared to a year earlier, including the District of Columbia, Vermont, Hawaii, and North Dakota.
“We’ve seen affordability improve as inventory declines have begun to lessen these areas,” says Danielle Hale, realtor.com®’s chief economist. “More balanced supply and demand dynamics have kept listing price growth below the national average, providing some much needed relief for stretched home buyers in these areas.”
Wages are growing, but prices are increasing at a faster clip, up nearly 6 percent in the first two months of 2018, Yun adds. Yun points to several solutions that could improve these conditions, such as more homeowners selling, investors releasing their portfolio of single-family homes back onto the market, and greater single-family home construction.
The index showed that the metros with the lowest affordability scores were all in California, where households can only afford 3 to 11 percent of the active housing inventory. The metros with the lowest affordability are: Los Angeles-Long Beach, Calif.; San Diego-Carlsbad, Calif.; San Jose-Sunnyvale, Calif.; Oxnard-Thousand Oaks, Calif.; and San Francisco-Oakland, Calif.
Meanwhile, the metros with the highest affordability scores were Youngstown-Warren, Ohio-Pennsylvania; Dayton, Ohio; Toledo, Ohio; Akron, Ohio; and Scranton-Wilkes-Barre, Penn. In these metros, households can afford nearly 75 percent of the homes that are currently for sale.