Middle Class Homebuyers Getting Priced Out of the Market

Here is a good article below which describes the plight of affordable housing for even the middle class, let alone those who are marginalized.  This article reminds me of a news story in Fairfax County, Virginia a few years back when then Fairfax County District Superior Sharon Bullova headed up a task force on "boarding houses" particularly in the Springfield area and was obviously also "profiling" or targeting Hispanics.  While this is a valid zoning issue - why didn't Supervisor Bullova tackle the underlying problem of affordable housing instead ??!!  Treat the cause... not the symptoms Mrs. Bullova!!  (She does not have a college education or degree by the way)

The National Low Income Housing Coalition (NLIHC) publishes some great reports which breaks down what the "hourly housing wage" is in their "Out of Reach" reports. 

In Virginia, the Fair Market Rent (FMR) for a two-bedroom apartment is $1,078. In order to afford this level of rent and utilities – without paying more than 30% of income on housing – a household must earn $3,592 monthly or $43,108 annually. Assuming a 40-hour work week, 52 weeks per year, this level of income translates into a Housing Wage of $20.72.

In Virginia, a minimum wage worker earns an hourly wage of $7.25. In order to afford the FMR for a two-bedroom apartment, a minimum wage earner must work 114 hours per week, 52 weeks per year. Or a household must include 2.9 minimum wage earners working 40 hours per week year-round in order to make the two-bedroom FMR affordable.

In Virginia, the estimated mean (average) wage for a renter is $15.79. In order to afford the FMR for a two-bedroom apartment at this wage, a renter must work 52 hours per week, 52 weeks per year. Or, working 40 hours per week year-round, a household must include 1.3 workers earning the mean renter wage in order to make the two bedroom FMR affordable.

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Middle-Class Buyers Getting Edged Out?

Daily Real Estate News | Sunday, October 13, 2013

Middle-class home buyers are struggling to find enough affordable homes on the 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 new study by Trulia. The real estate company based affordability rates on a monthly payment — after a 20 percent down payment as well as taxes and insurance costs — that was less than 31 percent of the metro area’s median household income.

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 National Association of REALTORS®.

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

The following are the markets with the least number of affordable homes for the middle class, according to Trulia’s study:

1. San Francisco
   Percentage of homes affordable to middle class: 14.2%
   Maximum affordable home price: $409,000
2. Orange County, Calif.
   Percentage of homes affordable to middle class: 23.1%
   Maximum affordable home price: $373,000
3. Los Angeles
   Percentage of homes affordable to middle class: 24%
   Maximum affordable home price: $271,000
4. New York
   Percentage of homes affordable to middle class: 25.3%
   Maximum affordable home price: $274,000
5. San Diego
   Percentage of homes affordable to middle class: 28.4%
   Maximum affordable home price: $309,000

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.