With home prices still going up, people wonder how the real estate market can continue to grow. From John Burns Real Estate Consulting:
Housing affordability has become a big problem in many major metros in the country. In fact, many middle-class buyers can no longer afford a new home. Consider the following:
- Price/income. Home price to median income ratios exceed the historical average for all 20 of the largest housing markets in the country.
- Payment/income. Payment to income ratios exceed the historical average in the majority of the 20 largest housing markets in the country.
- New home prices. New home prices exceed resale home prices by record levels, and not just because new homes are larger and better located than usual.
- Anticipation of rising rates. Bond markets currently assume that long-term rates will rise over the next few years, putting additional upward pressure on home prices.
Strong wage growth seems to be right around the corner, which will help affordability. Incomes should rise steadily over the next few years due to demand for high-income workers and a shortage of workers overall.
Job growth remains healthy in most markets, especially in high-income jobs. High-income job growth has recently emerged as a primary driver of new home demand, particularly in higher-priced markets. Nationwide, high-income jobs are up 2.6% year over year. However, growth in high-income sectors has played out very unevenly across the major metros.
Read full article here: