Study predicts homebuyers will see a shortage of options in their price range
By Jesse Darland
CTW Features
While existing home sales are expected to grow 1.7 percent in 2017, a new housing affordability model shows that many homebuyers can expect to see limited options within their price range over the next few months.
Created by the National Association of Realtors (NAR) and Realtor.com, the Realtors Affordability Distribution Curve and Store examines affordability conditions at different income percentiles for all active inventory on the market.
The affordability distribution curve shows the number of listings that are affordable to buyers in a particular income percentile. This affordability score varies between zero and two. A score of one or higher indicates homes in that particular market are more affordable to households in the market.
The January national affordability distribution curve was below the affordability line, reflecting the growing shortage of affordable housing inventory for most buyers. For lower income levels, the gap was generally larger. A household in the 35th percentile could afford 28 percent of all listings, while a median income household in the 50th percentile could afford 46 percent of all listings. Households in the 75th percentile could afford a near parity of 74 percent of listings.
“Home prices have ascended far past wage growth in much of the country in recent years because not enough homeowners are selling and homebuilders have not boosted production enough to meet rising demand,” NAR Chief Economist Lawrence Yun said. “NAR and Realtor.com’s new affordability measure confirms that buyers aren’t exaggerating about the imbalance. Amidst higher home prices and now mortgage rates, households with lower incomes have been able to afford less of all homes on the market last year and so far in 2017.”
States with the highest affordability score were Indiana (1.23), Ohio (1.22), Iowa (1.18), Kansas (1.17), and Michigan and Missouri (both at 1.14). States with the lowest affordability score were Hawaii (0.52), California (0.60), District of Columbia (0.65), and Montana and Oregon (both at 0.67).
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