It is a competitive market today and to add to the fierce landscape, agents must deal with a new trend – median home prices that are rising faster than wages at a clip we haven’t seen in nearly a decade.
Amid this news, what can cause the heart of any agent who survived the 2008 economic disaster to skip a beat, is there are buyers in smaller markets who are paying a smaller slice of their income to own a home.
As a result, knowing where to buy is key and this can create opportunity for agents today.
According to data released recently by ATTOM Data Solutions, the 2017 U.S. median home sale price of $253,000 is a 7.7 percent jump over 2016.
Moreover, the trend has resulted in housing prices that have reached their least affordable mark since the third quarter of 2008. Stagnant wages and rising interest rates are contributing factors.
Daren Blomquist, senior vice president of ATTOM, pointed out that these factors have “eroded home affordability nationwide to the lowest level in nearly nine years.”
For example, home prices in New York City have risen 4.1 percent in the past year, not a huge number, but still nearly double the rate of 2.5 percent that U.S. average hourly earnings have increased over the past 12 months, according to the Bureau of Labor Statistics.
According to the survey, the five least affordable counties include Marin County, Calif.; Kings County, N.Y.; Santa Cruz, Calif.; Summit County, Utah; and Monroe County, Fla.
The five most affordable counties include Roane, Henry and Hardin counties in Tennessee; Clayton County, Ga.; and Wayne County, Mich.
One state that is seeing home prices on the rise is Ohio. Cincinnati, Dayton and Cleveland still take only a small slice of the average area wages (18.4 percent) for the median home. However, most of the gains in areas like Columbus have been home grown, according to Jamie P. Menges, a principal and client adviser at PDS Planning in Columbus.
“The state’s economy has been advancing away from a manufacturing base to a more professional services and tech-oriented economy for 20 years, especially within the cities named in this report,” Menges said.
Nationwide, as home prices rise more quickly than wages, it starts to make many industry analysts start to talk about the possibility of a bubble.
“As home prices continue rising faster than inflation, two questions are being asked: why? And, could this be a bubble?” said David M. Blitzer Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Since demand is exceeding supply and financing is available, there is nothing right now to keep prices from going up.”
A tightening supply can be another factor, as people are wary of selling their homes without being certain they can find a new home they can afford. The shortage of homes to buy has caused prices to rise sharply in many metro areas.
“Over the last year, analysts suggested that one factor pushing prices higher was the unusually low inventory of homes for sale,” Blitzer said. “People are staying in their homes longer rather than selling and trading up.”
According to the National Association of Realtors, sales listings have plummeted 9 percent over the past year to 1.93 million.