Homebuyers throughout the United States, especially of the millennial variety, are saying affordability is their biggest concern as home prices rise and inventory shrinks.
But according to a new survey by Redfin, a Seattle-based real estate brokerage, 55 percent of homes in 40 large cities were found to be affordable for working-class households and still between two and four bedrooms in size.
The top threshold for a working-class income in Kansas City is $57,500, Redfin reported, and the median price of two- to four-bedroom homes on the market was $237,700. The top price of an affordable home for Kansas City was found to be $337,232.
As a result, 80 percent of two- to four-bedroom bedroom homes listed in Kansas City were founded affordable, though that number has decreased since the start of 2014, when it was at 88 percent, Redfin reported.
Its study found that more than half of listings are now affordable in more than 25 major U.S. cities. Detroit ranked the most affordable, with almost 97 percent of its two- to four-bedroom listings affordable to those with working-class household incomes.
More than 80 percent of homes were affordable to working-class households in Cleveland, Baltimore, Columbus, Memphis and Philadelphia. But in San Francisco, the least affordable city, just 3 percent of two- to four-bedroom homes homes were priced within reach of a working-class household.
Since 2014, Detroit’s affordable home percentage has inched up 1 percent, Redfin reported, but the percentages declined for every other city on the list. And in some cities, inventory for working-class households is disappearing fast. For instance, in Seattle, where Redfin is based, the affordable inventory has shrunk by 34 percent since 2014.
Here’s what Redfin said in a release:
“While it’s not surprising that affordable inventory is disappearing fast, it is surprising that 55 percent of homes are big enough and still affordable while homeownership is at its lowest rate in over 50 years.
“The problem, and the surprise, has something to do with affordable homes clustering together. Neighborhoods with a mix of home prices cover just 13 percent of U.S. cities. This makes it difficult to find affordable homes for sale in the neighborhoods where people with higher incomes tend to live.
“The solution? More housing inventory made of a healthy mixture of home types for people of all incomes. A mixed-housing inventory is good for more than just affordability. In these areas, households with different incomes are neighbors, a living arrangement that gives lower-income families a better shot at getting ahead.”
To determine a working-class household income value for each of the cities it surveyed, Redfin took the 50th percentile household income for the city’s parent metro region in 2014. Redfin then defined the affordable price for each city by taking the working-class household income and applying 28 percent of monthly income to the mortgage and principal on a 30-year loan at 4 percent, assuming a 20 percent down payment and not factoring in property taxes or insurance. This definition uses 28 percent of monthly income instead of 30 percent to make up for the taxes and insurance not being factored in.
In another Redfin study, which was released Aug. 25, more than 28 percent of homebuyers surveyed said that “prices are rising or are too high,” making affordability the top-ranking concern.
|Working Class Affordability Ranking||City||% Inventory Affordable on a working-class household income and Between 2 and 4 Bedrooms, as of July 2016||Change in Inventory Affordable for the Working Class (Jan 2014 to July 2016)||Median Price of a 2-4 Bedroom Home||Working-Class Annual Household Income|
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