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2014: issue 8
Increasing Home Values Affect Housing Affordability Nationwide housing affordability dipped in the second quarter of 2014 as several markets saw a firming of home prices, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today. In all, 62.6 percent of new and existing homes sold between the beginning of April and the end of June were affordable to families earning the U.S. median income of $63,900. This is down from the 65.5 percent of homes sold that were affordable to median-income earners in the first quarter. The national median home price increased from $195,000 in the first quarter to $214,000 in the second quarter. Meanwhile, average mortgage interest rates decreased from 4.57 percent to 4.44 percent in the same period. “With interest rates near historically low levels and strengthening job growth, now continues to be a great opportunity to buy a home,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “The second quarter HOI reflects the slow but steady march toward the historic levels of price appreciation and
interest rates that result in affordability levels we experienced before the mid2000s boom,” said NAHB Chief Economist David Crowe. “While we are seeing a slight decrease in affordability, it is still fairly high by historical standards.” Youngstown-Warren-Boardman, Ohio-Pa. claimed the title of the nation’s most affordable major housing market, as 90.4 percent of all new and existing homes sold in this year’s second quarter were affordable to families earning the area’s median income of $52,700. Meanwhile, Cumberland, Md.-W.Va. was the most affordable smaller market, with 97.2 percent of homes sold in the second quarter being affordable to those earning the median income of $54,100. Other major U.S. housing markets at the top of the affordability chart in the second quarter included IndianapolisCarmel, Ind.; Syracuse, N.Y.; Harrisburg-Carlisle, Pa.; and ScrantonWilkes-Barre, Pa; in descending order. Meanwhile, smaller markets joining Cumberland at the top of the affordability chart included Kokomo, Ind.; Davenport-Moline-Rock Island, Iowa-Ill.; Battle Creek, Mich.; and Lima, Ohio; in descending order. For a seventh consecutive quarter,
San Francisco-San Mateo-Redwood City, Calif. was the nation’s least affordable major housing market. There, just 11.1 percent of homes sold in the second quarter were affordable to families earning the area’s median income of $100,400. Other major metros at the bottom of the affordability chart were Santa AnaAnaheim-Irvine, Calif.; Los AngelesLong Beach-Glendale, Calif.; San Jose-Sunnyvale-Santa Clara, Calif.; and New York-White Plains-Wayne,
N.Y.-N.J.; in descending order. All five least affordable small housing markets were in California. At the very bottom was Santa Cruz-Watsonville, where 16.6 percent of all new and existing homes sold were affordable to families earning the area’s median income of $77,900. Other small markets included Napa, Salinas, Santa Rosa-Petaluma, and San Luis ObispoPaso Robles; in descending order. -NAHB
Record income gap fuels US housing weakness
Department data for the 100 largest metropolitan areas by population, analyzed for the Financial Times by property website Trulia, found the income disparity between the 10th most expensive region and the 90th by home prices in 2013 hit its widest since records began in 1969. The research shows Boston – ranked at 10 – reporting a per-capita income 1.61 times that of Cincinnati ranked at 90. At its low point in 1976, the gap was 1.36 times, between San Francisco and El Paso. A patchy labor market recovery has meant significant variations in job and income growth between regions across the U.S., which in turn has intensified the divergences across the country's housing markets. "Housing markets are playing out at very different speeds partly as a result of the lack of geographical breadth in the labor market. Certain sectors of the economy are performing better than others, propelling some housing markets over others," said Fannie Mae economist Mark Palim. While some areas are experiencing
bubble-like conditions, others are flailing. In Austin, Texas, a surge in technology jobs has driven demand. But in Akron, Ohio, which is struggling to boost employment through a new manufacturing base, house purchases have been more muted. In the government town of Sacramento, California, anxious homebuyers are waiting on the sidelines after being priced out by investors. Stanley Fischer, Janet Yellen's deputy chairman at the Federal Reserve, highlighted the central bank's concern about housing in a speech this week. "The housing sector was at the epicenter of the U.S. financial crisis and recession and it continues to weigh on the recovery," he said. In contrast to previous recoveries, he noted "residential construction [has been] held back by a large inventory of foreclosed and distressed properties and by tight credit conditions for construction loans and mortgages." How cities fared through the boom and bust, and the extent of state and local government control over foreclosures, have dictated housing
market performance. But job and income growth are playing an outsized role, Mr Palim added, particularly as mortgage interest rate rises and home price increases affect affordability. The number of Americans in work has surpassed the pre-recession peak. But there has been little lower and middle wage growth, constraining demand for houses across much of the country. The rebound in construction, led by apartments, has been concentrated in pockets of the country where incomes are among the greatest. Six of Trulia's 10 highest-income areas – including San Jose, Boston and New York – also had the strongest residential construction performance by permits in 2013 compared with past norms. Economists see construction activity as a better gauge of an improving housing market than prices, which have been skewed by an influx of investor buyers since 2012.
Anjli Raval Financial Times The income gap between America's richest and poorest metropolitan regions has reached its widest on record, shaping an uneven housing recovery that threatens to hold back the broader revival of the world's largest economy. The gap has narrowed and widened in past cycles, but the rebound from the most recent financial crisis has seen the ratio hit its most unequal since data collection began 45 years ago, fueling policy makers' concerns. Read MoreBuying a new home? What a difference $1,000 makes U.S. Commerce and Labor
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