With rising home values outpacing household incomes, even small bumps up in median sales prices are having a disproportionate impact on housing affordability in the local area and nationally.
A new study by the National Association of Home Builders (NAHB) puts a spotlight on what it terms the nation’s housing-affordability crisis, and illustrates how even a relatively small increase in the price of a home can prevent hundreds of thousands of households from achieving the goal of home ownership.
The study found that a $1,000 increase in the U.S. median new home price of $346,757 would push 153,967 households out of the market. Based on their incomes, these households would be able to qualify for a mortgage to purchase the home before the price increase, but not afterward.
Putting the affordability challenge further in perspective, 75.1 million households, or roughly 60 percent of all U.S households, currently are unable to afford a new median-priced home.
“While builders across the nation are reporting solid demand for new homes fueled by low interest rates, favorable demographics and a suburban shift to more affordable markets as a result of the COVID-19 crisis, many prospective buyers are hitting a brick wall due to a run-up in pricing,” said NAHB Chairman Chuck Fowke, a custom homebuilder from Tampa.
In the Washington metropolitan area, the median new-home price of $463,972 requires a household income of $100,850 to afford – something that 1.09 million of the region’s 2.28 million households do not have. An if that median sales price bumped up just $1,000, another 2,209 households would be priced out.
Builders report several factors contributing to a lack of affordable housing, including shortages or delays in obtaining building materials; rising material costs, particularly record-high lumber prices; excessive regulation; a shortage of construction workers; and a lack of buildable lots.
“Lumber prices are up more than 180 percent in the past 10 months, and this price spike has added more than $24,000 to the price of a new home,” Fowke said. “Based on the results of our study, this means that an additional 3.7 million households have been priced out.”
The number of priced-out households varies across both states and metropolitan areas; the study examines priced out estimates for every state and more than 300 metropolitan areas.
Among all the states, Texas had the largest number of home buyers that would be priced out of the market. The theoretical $1,000 price increase would push 14,309 households out of the market in the Lone Star state, followed by California (12,361) and Florida (10,215).
The metropolitan area with the largest priced-out effect, in terms of absolute numbers, is New York-Newark-Jersey City, N.Y.-N.J.-Pa., where 6,756 households are squeezed out of the market for a new median-priced home if the price increases by $1,000.
Affordability can vary widely by location. In Philadephia, for instance, 1.44 million households can afford the median-priced new home ($246,628) while only 962,000 cannot, while in Miami, where the median new-home price is $457,969, about 344,000 households can afford that but 1.93 million cannot.
• The median new-home price in Richmond is $254,894 and the median income is $54,576, meaning 261,515 households could afford the home and 219,509 could not. A $1,000 rise in the median sales price would leave 803 households out.
• The median new-home price in Hampton Roads is $281,517 and the median income is $62,186, meaning 354,000 households could afford the home and 365,994 could not. A $1,000 rise in the median sales price would leave 1,269 households out.
• The median new-home price in Roanoke is $317,002 and the median income is $68,638, meaning 49,488 households could afford the home and 76,546 could not. A $1,000 rise in median sales price would leave 224 households out.
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