Real prices on homes for sale is hurting affordability in many areas. For example, the median home available to buy in metro Los Angeles is currently listed at $650,000, which would take up 47 percent of the median income for that area.
Home values have soared in recent years, sending the national median as high as it’s ever been and forcing home buyers to pay more – even though their incomes do not always keep up. While low mortgage interest rates have helped keep the typically valued U.S. home affordable by historical standards, the real prices on homes actually available to buy is hurting affordability in many areas.
We considered the median value of all homes in a given market – even those not listed for sale – and the median price of those actually available to buy. The median list price for a U.S. home in the first quarter was $246,900 – well above the $197,100 median home value.
People buying the typical home actually listed for sale nationwide would spend 20 percent of the U.S. median income on a monthly mortgage payment. That’s roughly the same share of income it took to buy the median-valued home between 1985 to 1999, but well above the almost 16 percent required if you were to buy the median valued home in the first quarter of 2017. Because mortgage interest rates are so low, especially relative to the 1980s and 1990s, monthly mortgage payments are kept in check even as home values and prices rise, keeping homes relatively affordable.
The trend doesn’t hold across all markets, making home buyers in some metro areas pay more on today’s typical home for sale than they used to for the median-valued home. In more than half (19) of the country’s 35 most populous metro areas, the median price on homes listed for sale would take a greater share of median income to afford than the typically valued home in that same area did from 1985 to 1999.
For example, the median home available to buy in metro Los Angeles is currently listed at $650,000. That would take up 47 percent of the median income for that area. That’s more than the 35 percent of median income that the typical home in Los Angeles required from 1985 to 1999.
Other large markets in which buyers are paying a greater share today on the median home listed for sale than they used to include Dallas, Houston, Miami, Boston, Phoenix and Minneapolis.
That’s not to say these are the priciest or even the least affordable markets in the country.
Phoenix, for example, has historically been one of the most affordable places to buy a home – and it remains affordable. It’s just not as affordable as it used to be, particularly when you consider the list prices on homes currently for sale in Phoenix.
A buyer purchasing a Phoenix home at the median list price of $279,000 in the first quarter would spend 23 percent of the area’s median income to pay for it – which is more than the 19 percent currently required to pay for the area’s median valued home (many of which are not for sale). It’s also higher than the 21 percent that would have been required to cover the area’s median-valued home from 1985 to 1999.
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