The State of New Home Affordability – Q1 2017

As a national statistic, the recovery of home values from the Great Recession is complete.  In April 2017, Zillow reports that the median home value was $198,000; up 7.3% YOY, beating the value at the height of the market in 2007 by $2,000. Home sales also reflect the new paradigm. In the first quarter of 2017, Metrostudy data indicates that the median price of existing homes sold was $199,500, an 8.4% increase over the same period the previous year.  The new home median price also was higher, rising 3.2% to $308,100 for the same period.

What does this mean for affordability and new homes? In top markets, the premium for new homes over resale is obviously a challenge, but in some markets the list price of existing homes on the market is far oustripping the median home value in the market, which can lead to a more attractive scenario for home buyers to pay a small premium to get into a new home. In several markets a mortgage on a new home would require more than 50% of household income; far outstripping the recommended allotment for a home purchase.

On the upside, the continued availability of low mortgage rates is supporting home ownership desire; homes are still more affordable in many markets than they were historically. And, purchasing a home is an attractive proposition over renting in most markets. Nationally, rent consumes 29.2% of renters’ incomes.

Metrostudy took a look at the current state of new and existing home sales prices to illuminate the current spread between the two. This interactive chart shows the percentage of household income that will be paid on a mortgage of a median-priced home in the 2017 BUILDER Local Leaders markets.  Highlights:

  • It will take 50% of a median income earner’s budget to buy a median-priced new home in Los Angeles
  • There’s virtually no new home premium in Austin and Boston in Q1
  • Miami has the largest premium with an almost 20 point spread between new and resale; a new home requires 41% of income

Note to chart: You can sort the markets list, and obtain more information about a data point by hovering over it.