WASHINGTON, Feb. 16, 2017 /PRNewswire/ -- Existing-home sales
are forecast to expand 1.7 percent in 2017, but a new housing
affordability model created jointly by the National Association of
Realtors® and realtor.com®, a leading online
real estate destination, operated by News Corp (NASDAQ: NWS, NWSA);
(ASX: NWS, NWSLV) subsidiary Move, Inc., suggests homebuyers at
many income levels could see an inadequate amount of listings on
the market within their price range in coming months.
Using data on mortgages1, state-level
income2 and listings on realtor.com®, the
Realtors® Affordability Distribution Curve and
Score is NAR and realtor.com®'s new ongoing monthly
research designed to examine affordability conditions at different
income percentiles for all active inventory on the market.
The Affordability Distribution Curve3 examines how
many listings are affordable to those in a particular income
percentile. The Affordability Score4 – varying
between zero and two – 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.
Lawrence Yun, NAR chief
economist, says a top complaint Realtors® have been
hearing from clients is a notable imbalance between what they can
afford and what is listed for sale. "Home prices have ascended far
past wage growth in much of the country in recent years because not
enough homeowners are selling and homebuilders have not boosted
production enough to meet rising demand," he said. "NAR and
realtor.com®'s new affordability measure confirms that
buyers aren't exaggerating about the imbalance. Amidst higher home
prices and now mortgage rates, households with lower incomes have
been able to afford less of all homes on the market last year and
so far in 2017."
Reflecting a growing shortage of accessible inventory for most
income groups, the entire Affordability Distribution Curve in
January was below the equality line and the gap was generally wider
at lower incomes, which indicates even tighter supply conditions. A
household in the 35th percentile could afford 28 percent
of all listings, a median income household (50th percentile) could
afford 46 percent of listings and a household in the
75th percentile was able to afford 74 percent of active
listings.
"Consistently strong job gains and a growing share of
millennials entering their prime buying years is laying the
foundation for robust buyer demand in 2017," said Jonathan Smoke, chief economist at
realtor.com®, a leading online real estate destination.
"However, buyers with a lower maximum affordable price are seeing
heavy competition for the fewer listings they can afford. At a time
of higher borrowing costs, this situation could affect
affordability even more as buyers battle for a smaller pool of
homes and bid prices upward."
Calculating last month's Affordability Score – two times the
area under the Affordability Distribution Curve – further
highlights the disjointed rate of accessible supply on the market
across the U.S. Swift price growth and higher mortgage rates caused
January's Affordability Score (0.92) to shrink nationally from a
year ago (0.97) and also in many states. Only 19 states had a score
above one (conditions that are more favorable) and a meager three –
North Dakota, Alaska and Wyoming – saw year-over-year gains in their
score.
"Heading into the beginning of the spring buying season,
available supply is more reachable for aspiring buyers in the upper
end of the market and specifically in nearly all Midwestern
states," said Smoke. "Meanwhile, many states in the West and South
have seen deteriorating supply levels over the past year. Buyers in
these areas should know that it may take longer to find the right
home at a price they can afford."
The states last month with the highest Affordability Score were
Indiana (1.23), Ohio (1.22), Iowa (1.18), Kansas (1.17), and Michigan and Missouri (both at 1.14). The states with the
lowest Affordability Score were Hawaii (0.52), California (0.60), District of Columbia (0.65), and Montana and Oregon (both at 0.67).
"This shortfall of inventory at a time of healthy job gains in
most states is one of the biggest reasons for the depressed share
of first-time buyers and the inability for the homeownership rate
to rise above its near-record low," added Yun. "The only
prescription to reversing this adverse situation is to build more
entry-level and mid-market housing that aligns with current
household incomes."
The new Realtors® Affordability
Distribution Curve and Score was created to be a valuable
resource for Realtors® and consumers to assess the
affordability of markets in different income groups. The research
may eventually include metro-level data and will be updated on an
ongoing basis at
https://www.nar.realtor/topics/realtors-affordability-distribution-curve-and-score.
The National Association of Realtors®, "The Voice for
Real Estate," is America's largest trade association, representing
1.2 million members involved in all aspects of the residential and
commercial real estate industries.
Realtor.com® is the trusted resource for home
buyers, sellers and dreamers, offering the most comprehensive
source of for-sale properties, among competing national sites, and
the information, tools and professional expertise to help people
move confidently through every step of their home journey. It
pioneered the world of digital real estate 20 years ago, and today
helps make all things home simple, efficient and enjoyable.
Realtor.com® is operated by News Corp (NASDAQ: NWS,
NWSA) (ASX: NWS, NWSLV) subsidiary Move, Inc. under a perpetual
license from the National Association of REALTORS®. For
more information, visit realtor.com®.
1Down payment percentages are determined from
recently locked mortgages from Optimal Blue to determine the
maximum affordable home price. The maximum affordable home price
assumes that 30 percent of a purchaser's income can go to pay for
the financing, property tax, homeowner's insurance costs, and a
mortgage insurance premium if the down payment is less than 20
percent. Assumptions are made that homes are financed with a
30-year fixed-rate fully-amortizing mortgage at the prevailing
mortgage rate. Mortgage rates are those advertised on
realtor.com® during the period analyzed.
2Income distribution data is collected from Nielsen.
Nielsen data is provided as numbers of households within income
brackets, which are then calculated to find the percentile within,
above, or below any bracket. See detailed methodology here:
http://www.tetrad.com/pub/documents/popfactsmeth
3The Affordability Distribution Curve gathers income
data for households in our desired market and constructs a maximum
affordable house price for the income level using a down payment
percentage determined from recently originated mortgages from
Optimal Blue. Once a maximum affordable house price for a given
income percentile is determined, active listings on
realtor.com® are reviewed to see what percent of homes
on the market are priced less than that maximum affordable house
price.
4The Affordability Score is two times the area under the
Affordability Distribution Curve. The score varies between zero and
two. A score of zero will result when no household can afford any
of the homes that are currently on the market. A score of two will
result when all households can afford all of the homes that are
currently on the market. A score of one generally suggests a market
close to equality, in other words, homes on the market are
affordable to households in proportion to their income
distribution.
Information about NAR is available at
www.nar.realtor. This and other news releases are posted
in the "News, Blogs and Videos" tab on the website. Some
statistical data in this release, as well as other tables and
surveys, are posted in the "Research and Statistics" tab. Follow
NAR Media's Newsline blog at
http://narnewsline.blogs.realtor.org and Twitter at
@NARMedia.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/nar-realtorcom-identify-growing-rift-between-housing-availability-and-affordability-300408824.html
SOURCE National Association of Realtors