A new report from the National Association of Realtors (NAR), shows that home sales numbers are projected to grow this year, but at the expense of affordability.
According to the M Report, existing home sales could expand 1.7 percent in 2017, even though homebuyers at many income levels could see fewer listings on the market within their price range in the months ahead.
NAR’s Affordability Distribution Curve (ADC) method looked at the number of affordable listings to people in a particular income bracket, and then applied an affordability score between zero and two.
A score of one or higher suggests a market where homes for sale are more affordable to households in proportion to their income distribution.
The entire ADC in January was below the equality line, and the gap was wider at lower income levels, which reflects a growing shortage of accessible inventory for most income groups.
For example, a household in the 35th percentile could afford 28 percent of all listings, and a median income household in the 50th percentile could afford 46 percent of listings.
A household that’s in the 75th percentile was able to afford 74 percent of active listings.
The overall ADC score for January came in at 0.97, which was down from 0.92 a year ago. In total, nineteen states had a score above 1, and three of them – North Dakota, Alaska, and Wyoming, saw year-over-year gains in their score.
“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,” said Lawrence Yun, Chief Economist at NAR.
“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.”
“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.
Smoke warns, however, that buyers with a lower affordable price range are seeing strong competition for the few listings they can actually 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,” said Smoke.
As Yun sees it, a shortfall of inventory and healthy job gains happening simultaneously is a challenge.
“It’s 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,” said 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.”
As Daily Business News readers are aware, the manufactured housing industry provides one of the most practical and cost effective solutions to help everyday Americans realize the dream of homeownership. For more on the manufactured housing industry’s reactions to this, and the impact of President Donald Trump on the economy, click here. ##
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Submitted by RC Williams to the Daily Business News for MHProNews.