WASHINGTON, Feb. 16, 2017 /PRNewswire/ -- Existing-home sales
are forecast to expand 1.7 percent in 2017, but a new housing affordability model created jointly by the National Association of
Realtors® and realtor.com®, a leading online real estate destination, operated by News Corp (NASDAQ: NWS,
NWSA); (ASX: NWS, NWSLV) subsidiary Move, Inc., suggests homebuyers at many income levels could see an inadequate amount of
listings on the market within their price range in coming months.
Using data on mortgages1, state-level income2 and listings on realtor.com®, the
Realtors® Affordability Distribution Curve and Score is NAR and realtor.com®'s new ongoing
monthly research designed to examine affordability conditions at different income percentiles for all active inventory on the
market.
The Affordability Distribution Curve3 examines how many listings are affordable to those in a particular
income percentile. The Affordability Score4 – varying between zero and two – is a calculation that is equal to
twice the area below the Affordability Distribution Curve on a graph. A score of one or higher generally suggests a market where
homes for sale are more affordable to households in proportion to their income distribution.
Lawrence Yun, NAR chief economist, says a top complaint Realtors® have been
hearing from clients is a notable imbalance between what they can afford and what is listed for sale. "Home prices have ascended
far past wage growth in much of the country in recent years because not enough homeowners are selling and homebuilders have not
boosted production enough to meet rising demand," he said. "NAR and realtor.com®'s new affordability measure confirms
that buyers aren't exaggerating about the imbalance. Amidst higher home prices and now mortgage rates, households with lower
incomes have been able to afford less of all homes on the market last year and so far in 2017."
Reflecting a growing shortage of accessible inventory for most income groups, the entire Affordability Distribution Curve in
January was below the equality line and the gap was generally wider at lower incomes, which indicates even tighter supply
conditions. A household in the 35th percentile could afford 28 percent of all listings, a median income household
(50th percentile) could afford 46 percent of listings and a household in the 75th percentile was able to afford 74
percent of active listings.
"Consistently strong job gains and a growing share of millennials entering their prime buying years is laying the foundation
for robust buyer demand in 2017," said Jonathan Smoke, chief economist at realtor.com®,
a leading online real estate destination. "However, buyers with a lower maximum affordable price are seeing heavy competition for
the fewer listings they can afford. At a time of higher borrowing costs, this situation could affect affordability even more as
buyers battle for a smaller pool of homes and bid prices upward."
Calculating last month's Affordability Score – two times the area under the Affordability Distribution Curve – further
highlights the disjointed rate of accessible supply on the market across the U.S. Swift price growth and higher mortgage rates
caused January's Affordability Score (0.92) to shrink nationally from a year ago (0.97) and also in many states. Only 19 states
had a score above one (conditions that are more favorable) and a meager three – North Dakota,
Alaska and Wyoming – saw year-over-year gains in their
score.
"Heading into the beginning of the spring buying season, available supply is more reachable for aspiring buyers in the upper
end of the market and specifically in nearly all Midwestern states," said Smoke. "Meanwhile, many states in the West and South
have seen deteriorating supply levels over the past year. Buyers in these areas should know that it may take longer to find the
right home at a price they can afford."
The states last month with the highest Affordability Score were Indiana (1.23), Ohio (1.22), Iowa (1.18), Kansas (1.17),
and Michigan and Missouri (both at 1.14). The states with the
lowest Affordability Score were Hawaii (0.52), California
(0.60), District of Columbia (0.65), and Montana and
Oregon (both at 0.67).
"This shortfall of inventory at a time of healthy job gains in most states is one of the biggest reasons for the depressed
share of first-time buyers and the inability for the homeownership rate to rise above its near-record low," added Yun. "The only
prescription to reversing this adverse situation is to build more entry-level and mid-market housing that aligns with current
household incomes."
The new Realtors® Affordability Distribution Curve and Score was created to be a valuable resource
for Realtors® and consumers to assess the affordability of markets in different income groups. The research may
eventually include metro-level data and will be updated on an ongoing basis at https://www.nar.realtor/topics/realtors-affordability-distribution-curve-and-score.
The National Association of Realtors®, "The Voice for Real Estate," is America's largest trade association,
representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
Realtor.com® is the trusted resource for
home buyers, sellers and dreamers, offering the most comprehensive source of for-sale properties, among competing national sites,
and the information, tools and professional expertise to help people move confidently through every step of their home journey.
It pioneered the world of digital real estate 20 years ago, and today helps make all things home simple, efficient and enjoyable.
Realtor.com® is operated by News Corp (NASDAQ: NWS, NWSA) (ASX: NWS, NWSLV) subsidiary Move, Inc. under a
perpetual license from the National Association of REALTORS®. For more information, visit realtor.com®.
1Down payment percentages are determined from recently locked mortgages from Optimal Blue to determine the maximum
affordable home price. The maximum affordable home price assumes that 30 percent of a purchaser's income can go to pay for the
financing, property tax, homeowner's insurance costs, and a mortgage insurance premium if the down payment is less than 20
percent. Assumptions are made that homes are financed with a 30-year fixed-rate fully-amortizing mortgage at the prevailing
mortgage rate. Mortgage rates are those advertised on realtor.com® during the period analyzed.
2Income distribution data is collected from Nielsen. Nielsen data is provided as numbers of households within income
brackets, which are then calculated to find the percentile within, above, or below any bracket. See detailed methodology here:
http://www.tetrad.com/pub/documents/popfactsmeth
3The Affordability Distribution Curve gathers income data for households in our desired market and constructs a
maximum affordable house price for the income level using a down payment percentage determined from recently originated mortgages
from Optimal Blue. Once a maximum affordable house price for a given income percentile is determined, active listings on
realtor.com® are reviewed to see what percent of homes on the market are priced less than that maximum affordable
house price.
4The Affordability Score is two times the area under the Affordability Distribution Curve. The score varies between
zero and two. A score of zero will result when no household can afford any of the homes that are currently on the market. A score
of two will result when all households can afford all of the homes that are currently on the market. A score of one generally
suggests a market close to equality, in other words, homes on the market are affordable to households in proportion to their
income distribution.
Information about NAR is available at www.nar.realtor. This and other news releases are posted in the "News, Blogs and Videos" tab on the
website. Some statistical data in this release, as well as other tables and surveys, are posted in the "Research and
Statistics" tab. Follow NAR Media's Newsline blog at http://narnewsline.blogs.realtor.org and Twitter at @NARMedia.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/nar-realtorcom-identify-growing-rift-between-housing-availability-and-affordability-300408824.html
SOURCE National Association of Realtors