“The number of middle-class Americans who can afford home ownership is falling in more cities, according to a new industry study.
The report from real estate research firm Trulia concludes that in 20 of the top 100 largest metro area, the middle class are now frozen out of the home buying market.
Trulia considers a home affordable for a median income buyer in a given market if total monthly costs — including mortgage, insurance and property taxes — after a 20 percent down payment are less than 31 percent of a region’s median household income.
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Trulia Chief Economist Jed Kolko noted monthly payments for an average home now cost 20 percent more than a year ago, according to USA Today.
“Even having a college degree is no guarantee that homeownership is within reach in the priciest markets. There’s no easy way to make housing more affordable, though new construction can help,” Kolko said.
The trouble with that last point, though, is that new construction is more rare in the most expensive markets because fewer people can afford to buy there — a simple case of supply and demand, according to Kolko.
“For America’s most expensive housing markets to become significantly more affordable, they would need either a spectacular drop in demand — a local economic collapse, for example — or a dramatic increase in housing supply.”
The least affordable U.S. markets, and the percentage of homes for sale in each where median-income Americans can afford to buy, are:
- San Francisco, 14 percent
- Los Angeles, 23 percent
- Orange County, Calif., 24 percent
- New York/New Jersey Metro, 25 percent
- San Diego, 28 percent
- Ventura County, Calif., 29 percent
- San Jose, Calif., 34 percent
- Fairfield County, Conn., 37 percent
- Honolulu, 39 percent
- Oakland, Calif., 40 percent.
In addition, some popular metro areas had particularly steep drops in affordability…”
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