Middle Class Home Buyers Struggle To Find Affordable Homes

Affordable Homes

Middle class home buyers struggle to find affordable homes in the real estate market as rising prices, higher interest rates, and flat incomes limit their choices.

More than half of homes for sale this month in 14 of the 100 largest metros were out of reach for middle class home buyers, according to a study by Trulia. The real estate company based affordability rates on a monthly payment — after a 20 percent down payment plus taxes and insurance costs — that was less than 31 percent of the metro area’s median household income. FlatFeeNews

The number of affordable homes for middle class buyers has decreased or stayed flat in 99 metros since October 2012, Trulia found. Rochester, N.Y., was the only metro to see a gain.

Places like Orange County, Calif., have seen the worst tightening of affordable inventory for middle class buyers. In 2012, 44 percent of homes there were affordable to the middle class; that has fallen to 23 percent this year.

A big drop in foreclosures and lower-priced homes is a major catalyst of the shift. The percentage of existing home sales nationwide that were distressed properties selling at discounts has fallen from 23 percent last year to 12 percent as of August, according to the NAR.

Though housing affordability for the middle class appears to be the most problematic in California, other metros are also seeing affordability lessen by big margins. In Boston, middle-class buyers now can afford 41 percent of homes on the market, down from 53 percent last year. In Denver, the percentage has fallen from 70 percent to 55 percent. Seattle has gone from 66 percent to 55 percent.

Despite the drops, overall housing affordability nationwide still remains high historically. In 40 of the 100 metro areas, 70 percent or more of the homes remained within reach to middle-class buyers. Also, home prices remain 5 percent undervalued based on long-term price, income, and rent levels, Jed Kolko, Trulia’s chief economist, told USA Today.

Read more Middle Class Home Buyers with FlatFeeNews: Middle-class buyers see fewer affordable homes

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Source: USA Today 10/10/2013

 

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