Good news for home builders: More Americans were able to afford a home in the third quarter of 2019, according to an analysis by Realtor.com. A whopping 81 of the nation’s 100 largest metros became more affordable due to factors such as low rates and a strong job market. An increase in affordability coupled with the strengthening construction activity and high demand could create a great opportunity for builders coming into 2020. Still, high prices keep homeownership out of reach for many Americans, and the game to find an affordable house remains highly local.
Affordability is a hot topic these days, with many would-be buyers feeling left out of the housing market because of high prices.
As home prices have climbed in recent years, wage increases have failed to keep pace. From the third quarter of 2018 to the third quarter of 2019, home prices rose 5.3 percent, while household incomes rose by 3.5 percent, according to Realtor.com. On the bright side, low mortgage rates under 4.0 percent have reduced interest costs and therefore monthly payments to at least partly offset high home prices.
Realtor.com’s analysis of home prices and median household incomes generates an “affordability score.” An affordability score of one or greater on the index indicates that a metro area’s housing market is generally more affordable to households across all incomes. In the third quarter of 2019, the majority of metro areas were unaffordable. Only 18 of the nation’s largest 100 metros had a score of one or greater and the national score of 0.84 registers as unaffordable.
The good news, though, is that a combination of low rates, higher wages and slowing price appreciation meant that in the third quarter of 2019, 81 of the nation’s 100 largest metro areas became more affordable compared to the third quarter of 2018.
