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February 11, 2015

The Affordability Stretch Got A Little Easier

Research and Analysis

If you're like most Americans, you probably haven't gotten much of a raise over the past decade, especially when adjusting for inflation. However, with the latest jobs data we saw a glimmer of good news — wage growth up 2.2%. Income growth is one of the key ingredients in the housing affordability brew.

The other two are mortgage rates and house prices. Mortgage rates have actually fallen over the past quarter, which provides more buying power. House prices are still appreciating, however not as fast as they once were, so this too is helping on the affordability front.

Of course, how far potential buyers have to stretch (or not) to afford a home, depends on where they live, how much they put toward a down payment as well as local taxes and insurance among other things. All these factors and more can be adjusted using our interactive affordability map, including if a raise is expected this year.  So, out of 164 metros where does the typical family have to stretch the most to buy a home, and where do they have ample buying power?

Top 5 Most Affordable MetrosTop 5 Least Affordable Metros
Rockford, IL Honolulu, HI
Youngstown, OH San Francisco, CA
Decatur, IL San Jose, CA
Toledo, OH San Diego, CA
Topeka, KS Los Angeles, CA

Thirty-seven U.S. metros were not affordable as of the fourth quarter, that's down from 52 in the third quarter, and down from 38 from the same time last year.

Of the three affordability components, nationally, house prices rose by a forecasted 0.8% according to the Freddie Mac House Price Index, incomes rose a bit less than 1%, while mortgage rates actually declined from an average of 4.14% to 3.97%, for a 30-year fixed-rate mortgage based on our survey from the previous quarter.

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