Previously Unaffordable Homes Are Becoming Attainable for Millennials
While the United States housing market has seen a great restoration since the recession, the recovery over the past few years has been uneven across the country.
According to CBS News, a study in The Economist revealed that U.S. housing prices have, on average, appreciated by 17% over the past three years. However, they profess that this statistic does not reflect the overall market landscape.
The latest annual Coldwell Banker Home Listing Report published that half of the 100 most expensive housing markets are in California, while cities in the Midwest contain the most affordable rankings.
The president and CEO of Coldwell Banker Real Estate, Budge Huskey, warned consumers to examine these statistics carefully.
“At this point in the stage of the recovery … it’s really important that people go beyond the national metrics,” he told CBS MoneyWatch.
Another report from coldwellbanker.com looked at the average listing price of a four-bedroom, two-bathroom property of over 81,000 listings from nearly 3,000 different markets. What they found was that the top five most expensive markets were in California, four of which are located within Silicon Valley, where the tech-fueled boom created a cutthroat housing market.
One of the demographics this affects most, is the Millennial generation, those between the ages of 25 to 34. Fortunately, The MReport revealed that housing markets are currently more affordable than unaffordable for Millennials.
According to the Federal government, “unaffordable” is defined as monthly mortgage rates that exceed 31% of a household’s monthly income.
Research conducted by the online real estate organization Trulia, claimed that this sentiment may be reversing its field.
They found that many housing markets have experienced strong wage and income growth. The average share of a household’s income needed for mortgage payments is shrinking, meaning that the once unaffordable home could become affordable just within a matter of months after purchase.
Strangely enough, the majority of markets with unaffordable homes for sale that eventually became affordable over the span of a 30-year mortgage were in the Northeast or East coast. Contrarily, the majority of unaffordable houses that will remain so are located on the West coast.
The overall initial mortgage payments are already affordable for Millennials in 73 out of the 100 largest housing markets in the country. The initial payments account for 20% less of a household’s monthly income.
However, 17 of the largest housing markets valued at a median price are considered to unnaffordable for Millennials. But the good news is that though the monthly payments may be initially unffordable for these homes for sale, they are projected to become affordable in less than two years.