A new housing affordability measure, the REALTORS® Affordability Distribution Curve and Score from the National Association of REALTORS® (NAR) and realtor.com®, affirms the imbalance between housing costs and wages—and indicates inventory will continue to be constrained this spring.
The Affordability Distribution Curve, which examines how many listings are affordable to those in a particular income percentile, came in under the equality line in January, with the gap generally wider at lower incomes. A household in the 35th percentile could afford 28 percent of all listings; a household in the 50th percentile (median income) could afford 46 percent of listings; and a household in the 75th percentile could afford 74 percent of listings. The Affordability Score, which is a calculation varying between zero and two equal to twice the area below the Affordability Distribution Curve on a graph, was 0.92 in January. A score of one or higher suggests a market where homes for sales are more affordable in proportion to income; only 19 states had a score higher than one.
“Home prices have ascended far past wage growth in much of the country in recent years because not enough homeowners are selling and home builders have not boosted production enough to meet rising demand,” says Lawrence Yun, NAR chief economist. “NAR and realtor.com’s new affordability measure confirms that buyers aren’t exaggerating about the imbalance. Amid 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.”
“Consistently strong job gains and a growing share of millennials entering their prime buying years is laying the foundation for robust buyer demand in 2017,” says Jonathan Smoke, chief economist at realtor.com. “However, buyers with a lower maximum affordable price are seeing heavy competition for the fewer listings they can afford. At a time of higher borrowing costs, this situation could affect affordability even more, as buyers battle for a smaller pool of homes and bid prices upward.”
For more information, please www.nar.realtor.
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