One in five U.S. housing markets are now less affordable than their historic average as price gains outpace income growth from New York to San Francisco.
Of the 475 counties analyzed by RealtyTrac through October, 98 areas weren’t as affordable compared with the average level for the period starting in January 2000, the Irvine, Calif.-based data company said in a report today. Brooklyn, N.Y., where a resident would need to devote 98% of the median income to afford the payment on a median-priced home of $615,000, was the least-affordable market, followed by San Francisco and Manhattan.
Investors and foreign buyers have helped drive up home prices in high-cost markets, keeping many residents locked into rentals, where costs also have been rising. Prices in 20 U.S. cities climbed 4.9% in the year through September, the SP/Case-Shiller index shows. Across the country, values have gained 25% since their February 2012 bottom.
“Incomes have not grown nearly as fast as home prices” in the regions where affordability declined, Daren Blomquist, vice president at RealtyTrac, said in an interview. “That disconnected home-price growth has been driven by investors and other cash buyers who aren’t as constrained by income.”
As a result, many markets are out of reach for traditional buyers, he said.
Los Angeles and Orange County in California and the Houston, Dallas and Boston regions are among the 98 areas where homes were less affordable than the historic average, RealtyTrac said. The company based its calculations on the median household income required to make a monthly payment for a median-priced home from the beginning of 2000 through October, using a 10% down payment and the average 30-year fixed mortgage rate for each month.
About 12% of the counties studied now have a higher median home price than the peak of the 2005-2008 property bubble. In addition to Brooklyn, Manhattan and San Francisco, they include Honolulu; Travis County in the Austin, Texas, area; and Fulton County, Ga.
In Brooklyn, the median sale price climbed to a record $587,515 in the third quarter, according to a report by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. Values in the borough, where almost 70% of residents rent, have been surging as wealthy New Yorkers priced out of Manhattan displace the poor.
In a deal completed last month, a renovated 1890s townhouse in the Park Slope section sold for $10.8 million a record for the neighborhood and Brooklyn’s third-most-expensive purchase, the Curbed real estate blog reported yesterday.
In the 475 counties analyzed by RealtyTrac, buying a median-priced home in October required 26% of the median income on average. That compared with an average of 41% in each county’s respective peak month during the housing bubble, according to the report.