Affordability today is the key word today when it comes to housing – that is the LACK of affordability. Despite job growth greater than the 40-year average, rising wages (up 3.1 percent in the prior 12-months) and lower interest rates today compared to a year ago, affordability has seen housing sales drop 3.35 percent year-to-date. In 2018, demand outstripped supply with 1.5 million new household formations and only 1.2 million new dwelling units. As a result, prices and rents continue to rise and overall affordability erodes.
Supply and demand for housing varies from one location to the next. As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market (or a National Economy). The same is true regarding typical housing values across the country. Some states cost more than others. The same is true within states across Metropolitan Statistical Areas (MSAs), cities and neighborhoods.
Housing affordability is a function of housing cost and income, with each of these metrics varying on where one lives and works. Supply and demand varies for each of these from one location to another.
Median home values for each state were ranked by 24/7 Wall Street. The data were taken from the 2017 American Community Survey completed by the U.S. Census Bureau. The following two tables list the 10-states with the greatest and least median home prices from the 2017 American Community Survey. The average homeownership rate was 62.1 percent in the 10 most-expensive states compared to 67.9 percent in the 10-least cost states. Hawaii had the most expensive median price at $617,400 and West Virginia the least at $119,800. The typical home in Hawaii is 5.15 times more costly than in West Virginia. Buyers in Hawaii saw their median home price jump by almost 25 percent in the past five years compared to 19.3 percent in West Virginia.
Affordability is a function of not just price, but also income. The next two tables show the most and least expensive states for housing, calculated by dividing the median home price by median household income. For the U.S., median home price is 3.6 times median household income. Homebuyers in Hawaii pay more than twice that at 7.94 times income while those in West Virginia saw the median priced-home cost 2.55 times income.
The next two tables list the 10 states with the smallest and largest median home price multiple to income.
The data for all 50 states are shown in the following table.
To read the entire article in USA Today click https://www.usatoday.com/story/money/2019/06/30/hawaii-west-virginia-home-value-by-state/39627481/
The latest median home price for the U.S. was $277,700 as reported by the National Association of Realtors® (NAR) as of May 2019. That was up 4.75 percent compared to a year ago. In the same period, aveage hourly wages rose 3.1 percent. Pressure on housing afforability continues.