Despite years of rapidly accelerating home prices, it’s becoming more affordable to purchase a home in the majority of the nation’s 100 largest markets. The number of markets seeing improvements nearly doubled since the beginning of the year. The REALTORS® Affordability Distribution Score looks at how many home listings in each market are affordable to local buyers at different income levels*. The country’s score increased to 0.84 at the end of the third quarter, up from 0.80 last year. This means that according to our measure, homes became 5 percent more affordable to buyers over the past year. However, the majority of metros across the country continue to suffer from affordable supply constraints despite recent improvements.
Q3 2019 Findings:
- Overall, affordability increased by 5 percent at the national level from September 2018 to September 2019
- Eighty-one of the 100 largest metros in the country have seen improved affordability, an increase from 44 in the first quarter of 2019
- Affordability in these metros is spurred by growing incomes, lower mortgage rates, decelerating or falling listing prices, and inventory increases
- Des Moines, IA topped the list of most improved metros
- Affordability issues still persist, with 82 out of 100 large metros registering affordability scores which are below ideal
Affordability Improves Across All Income Levels Nationally but Remains Low
In the third quarter of 2019, 81 out of the nation’s 100 largest metros became more affordable compared to the same time period in the previous year, whereas 10 were unchanged and 9 became less affordable. This is a large improvement from the first quarter of 2019 when only 44 metros had seen an increase in affordability.
In the third quarter of 2019, households earning below the median income are finally seeing improvements to home affordability. In the first quarter, we reported that some affordability gains were starting to appear in select metros across the country, but that the gains were predominantly gained in the upper-income percentiles. At the time, only households earning above the 90th percentile income saw an improvement to affordability.
Now, this trend has expanded and households across the income spectrum are seeing some slight improvements in affordability. Households earning $35,000, which roughly represent the 30th percentile of households, have actually seen the share of active listing inventory that is accessible to them increase from 15.6 percent to 15.8 percent over the past year, and households earning $75,000, which roughly represent the 60th percentile of households, have seen the share of inventory that is affordable to them increase by an even larger amount, from 46.7 percent to 48.5 percent.
The gains in affordability were driven by growing incomes, decelerating listing price growth, and falling interest rates. Over the past year, the national median household income grew by 3.5 percent. Median listing prices, while still rising, grew by only 5.3 percent year-over-year at the end of the third quarter, compared to a growth rate of 7.6 percent at the same time last year. Falling interest rates made the biggest contribution to affordability. Having dropped by more than 100 basis points over the year, lower interest rates allowed households to increase the price of a home they are shopping for by 7.4 percent, while still remaining within budget.
However, this increase in purchasing power led to demand that quickly depleted the stock of homes for sale, as home inventory decreased by 4.1 percent year-over-year at the end of the third quarter. Given rising demand and a slow pace of home construction, available inventory is expected to remain low over the next year, making it difficult to find a home even if they have become more affordable.
Moreover, even though housing affordability has increased over the past year, it is still out of reach for many Americans. An affordability score of 1 or greater in our index indicates that a metro’s housing market is generally more affordable to households across all incomes. In the third quarter, only 18 of the nation’s largest 100 metros had a truly affordable housing market, and the nation’s score of 0.84 still registers as unaffordable.
Figure 1: Change in Affordability Across Income Percentiles, Nationally
Incomes, Price Growth, and Inventory Affecting Most and Least Improved Markets
The metro markets with the biggest gains in affordability over the last year saw rising incomes, falling or slowly growing listing prices, and an increase in the inventory of available homes for sale. Incomes grew an estimated 5.9 percent over the past year on average, compared to an average of 3.5 percent for all metros on our largest 100 list. They also saw September median listing prices decrease by 1.5 percent on average, compared to a 4.4 percent gain in the full list of markets. Lastly, they saw inventory increase by 6.7 percent on average, compared to a decline of 5.6 percent for the full list of markets.
Top 5 Metros which Became More Affordable
- Allentown-Bethlehem et al, PA-NJ – Affordability Score increased from 0.98 to 1.11
- Des Moines-West Des Moines, IA – Affordability Score increased from 0.90 to 1.04
- Atlanta-Sandy Springs et al, GA – Affordability Score increased from 0.77 to 0.89
- Minneapolis et al, MN-WI – Affordability Score increased from 0.79 to 0.90
- San Francisco-Oakland et al, CA – Affordability Score increased from 0.47 to 0.59
However, not all buyers will feel the increase in affordability in these metros equally. As we noted in September, the number of homes across the country priced above $750,000 grew 4.7 percent over last year, while the number of homes $200,000 and under declined by 9.8 percent, meaning households in the low and mid-income tiers looking for more affordable homes are still facing tight inventory conditions.
In Des Moines, affordability increased across all income percentiles, however, it increased most for the 50th income percentile. Allentown’s affordability increased fairly evenly for all except the highest income percentiles. In San Francisco, Atlanta, and Minneapolis, affordability increased most for the mid-to-high incomes around the 60th and 70th percentiles, but very little or not at all for lower incomes.
Figure 2: Top 5 Metros which Became More Affordable
The metro markets with the biggest decreases in affordability over the last year saw falling or slowly growing incomes, increasing listing prices, and a sharp decrease in the inventory of available homes for sale. Incomes in this group fell an estimated 0.3 percent over the past year on average, compared to an average 3.5 percent gain for all metros on our largest 100 list. They also saw September median listing prices increase by 11.8 percent on average, compared to a smaller 4.4 percent gain in the full list of markets. Lastly, they saw available inventory for sale decrease by 18.9 percent on average, compared to a decrease of 5.6 percent for the full list of markets.
Top 5 Metros which Became Less Affordable
- Tulsa, OK – Affordability Score decreased from 0.96 to 0.89
- El Paso, TX – Affordability Score decreased from 0.83 to 0.77
- Winston-Salem, NC – Affordability Score decreased from 0.84 to 0.80
- Rochester, NY – Affordability Score decreased from 0.98 to 0.95
- Philadelphia et al, PA-NJ-DE-MD – Affordability Score decreased from 0.92 to 0.89
Again, this decrease in affordability did not materialize equally across all income percentiles. In Winston, the share of inventory available to those earning the 90th percentile income actually grew by 0.7 percent over the past year. In Tulsa, El Paso, and Winston, the declines in affordability were felt most in the 40th to 60th income percentiles. However, in Philadelphia and Rochester, affordability declined most in the 20th to 30th income percentiles.
Figure 3: Top 5 Metros which Became Less Affordable
Largest 100 Metros Ranked by Q3 2019 Affordability Score
|Metro||Affordability Score Q3 2019||Share of Inventory Affordable at Median Household Income||Y-Y Change in Affordability Score||Y-Y Change in Share of Inventory Affordable at Median Household Income|
|Youngstown-Warren et al, OH-PA||1.19||67%||0.00||-0.2%|
|Allentown-Bethlehem et al, PA-NJ||1.11||59%||0.14||9.3%|
|St. Louis, MO-IL||1.10||59%||0.07||5.0%|
|Scranton–Wilkes-Barre et al, PA||1.09||59%||0.01||0.5%|
|Des Moines-West Des Moines, IA||1.04||56%||0.13||17.2%|
|Little Rock et al, AR||1.02||56%||0.03||3.3%|
|Hartford-West Hartford et al, CT||0.98||52%||0.01||0.8%|
|Baton Rouge, LA||0.97||50%||0.03||3.0%|
|Louisville et al, KY-IN||0.96||47%||0.08||5.9%|
|Buffalo-Cheektowaga et al, NY||0.96||50%||0.04||3.1%|
|New Haven-Milford, CT||0.95||49%||0.08||8.3%|
|Kansas City, MO-KS||0.92||41%||0.05||3.5%|
|Omaha-Council Bluffs, NE-IA||0.92||41%||0.10||6.6%|
|Minneapolis et al, MN-WI||0.9||46%||0.11||11.1%|
|Virginia Beach et al, VA-NC||0.9||43%||0.04||4.5%|
|Oklahoma City, OK||0.89||43%||0.00||0.7%|
|Atlanta-Sandy Springs et al, GA||0.89||41%||0.12||10.2%|
|Philadelphia et al, PA-NJ-DE-MD||0.89||44%||-0.03||-2.1%|
|Augusta-Richmond County, GA-SC||0.89||41%||0.00||-0.7%|
|Washington et al, DC-VA-MD-WV||0.86||42%||0.01||0.9%|
|Grand Rapids-Wyoming, MI||0.86||40%||0.05||6.4%|
|Chicago et al, IL-IN-WI||0.85||40%||0.04||3.8%|
|Greensboro-High Point, NC||0.85||37%||0.01||-2.0%|
|Milwaukee-Waukesha et al, WI||0.82||39%||0.02||0.6%|
|Lakeland-Winter Haven, FL||0.80||28%||0.06||5.8%|
|Charlotte-Concord et al, NC-SC||0.80||32%||0.10||8.8%|
|New Orleans-Metairie, LA||0.78||32%||0.01||1.2%|
|El Paso, TX||0.77||24%||-0.06||-6.4%|
|Tampa-St. Petersburg et al, FL||0.76||30%||0.03||2.9%|
|Salt Lake City, UT||0.74||29%||0.08||6.1%|
|Palm Bay-Melbourne et al, FL||0.74||30%||0.05||4.2%|
|Cape Coral-Fort Myers, FL||0.74||32%||0.08||7.9%|
|Austin-Round Rock, TX||0.74||30%||0.07||8.5%|
|Houston-The Woodlands et al, TX||0.74||26%||0.02||2.1%|
|Las Vegas-Henderson-Paradise, NV||0.73||25%||0.09||7.1%|
|Dallas-Fort Worth-Arlington, TX||0.72||24%||0.07||6.1%|
|San Antonio-New Braunfels, TX||0.71||24%||0.06||5.6%|
|Nashville-Davidson et al, TN||0.71||26%||0.05||5.6%|
|Deltona-Daytona Beach et al, FL||0.70||23%||0.08||6.3%|
|Spokane-Spokane Valley, WA||0.69||23%||0.09||4.8%|
|Durham-Chapel Hill, NC||0.69||22%||0.06||3.8%|
|Portland-South Portland, ME||0.69||26%||0.00||0.2%|
|North Port-Sarasota et al, FL||0.67||23%||0.04||2.0%|
|Boise City, ID||0.67||17%||0.03||2.6%|
|Charleston-North Charleston, SC||0.64||24%||0.04||4.1%|
|Riverside et al, CA||0.63||16%||0.06||4.5%|
|Portland-Vancouver et al, OR-WA||0.63||15%||0.09||5.9%|
|Colorado Springs, CO||0.62||16%||-0.01||1.1%|
|Miami-Fort Lauderdale et al, FL||0.61||21%||0.05||3.4%|
|Sacramento–Roseville et al, CA||0.59||12%||0.00||-1.2%|
|San Francisco-Oakland et al, CA||0.59||18%||0.11||9.3%|
|Urban Honolulu, HI||0.56||21%||0.08||3.8%|
|New York-Newark et al, NY-NJ-PA||0.53||15%||0.02||0.6%|
|San Jose-Sunnyvale et al, CA||0.53||10%||0.08||4.9%|
|Oxnard-Thousand Oaks-Ventura, CA||0.41||6%||-0.02||0.8%|
|San Diego-Carlsbad, CA||0.40||6%||0.03||2.0%|
|Los Angeles-Long Beach et al, CA||0.35||5%||0.02||1.5%|
*Methodology: The REALTORS® Affordability Distribution Curve and Score is a monthly NAR and realtor.com® data series designed to examine affordability conditions at different income percentiles for all active inventory on the market. The Affordability Distribution Curve examines how many listings are affordable to those in a particular income percentile. The Affordability Score varies between zero and two and is a calculation that is equal to twice the area below the Affordability Distribution Curve on a graph. A score of one or higher generally suggests a market where homes for sale are more affordable to households in proportion to their income distribution.
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