Buying a New Home becoming Increasingly Difficult for the General Buyer
Beyond all the hoopla about the booming real estate market, a stark fact often goes under the
carpet. No one seems to notice the fact that buying the home is increasingly becoming difficult
for the average buyer. There are several factors to blame, including rising mortgage rates,
stagnant income, increasing expenditure, and higher home prices (a strong indicator of a
booming real estate market).
A look at the statistics reveals some interesting parameters. A recent review by Wells Fargo and
the NAHB (National Association of Home Builders) shows that only 69.3 % of the families in
the median income range of $64,400 were capable of affording a home in the period between
April and June. This is a decline from the first quarter of 2013, when 73.7 % of the homes were
affordable for buyers. The highest affordability rate in the current cycle was during late 2011,
when 78% of the properties were affordable.
“The high affordability a few years back is traceable to the favorable mortgage rates and the low
home prices during the recession”, confirmed Rick Judson, NAHB chairman from Charlotte.
However, of late, things are becoming increasingly difficult for home buyers. Both the prices and
the rates are on a high now. The median price of the homes sold during the second quarter was at
$202,000, which records a significant hike of 9.2% from last year, when the median price was
$185,000. The interest rates for the general mortgage for 30 years also averaged to 3.99% in the
three-month period. During the second quarter of 2012, it was at 3.68%.
The metro area of Ogden in Utah held the record for being the most affordable housing market in
the country. Residents belonging to the median income ceiling of $70,800 found 92.8% of the
homes to be affordable during the last quarter. This was the fourth consecutive time that this area
topped the affordability listings. Indianapolis ranked second on the affordability list with a score
of 91.8%. Other important markets in the top affordability lists included Youngstown in Ohio,
and Buffalo in New York. San Francisco held the record for the least availability. Despite a hefty
median income of $101,200, buyers only found 19.3% of the homes to be affordable.
Other cities listed in top of the unaffordable chart were San Jose, New York, Santa Ana and Los
Angeles. The housing affordability index was well above 70% since 2008. However, if you
compare the present affordability to that of the bubble years, the current times are still better.
Consider the fact that during 2006, only 40% of real estate was affordable at one point.