By DON FENLEY

Affordable housing – or the lack of it – gets a lot of attention these days. Some of it’s accurate. Some isn’t.

Let’s look at the numbers. Good news first.

So far this year, 1,320 homes in the $100K-$250K price range have been sold here. Than’s 18 more than last year. It also accounts for 38.6% of all the homes sold during the first five months of the year.

The picture is not that good when compared to the first five months of the region’s pre-pandemic year. I use 2018 as a benchmark. During that year there were 4,312 affordable sales, and they accounted for 55.2% of all sales.

Things began changing during and especially after the pandemic. Demand increased, and the market skyrocketed. The move-up and luxury market dominated, and the affordable market dwindled.

Here’s another then and now look at the situation.

Last month there were 506 sales of homes in the $200K-$250K range – the top end of the affordable market. During the first five months of the pre-pandemic year, there were 1,104 sales.

There were 238 properties for sale in that price range last month. During the pre-pandemic comparison, there were 764.

So, what happened?

Between 2018 and last year, home prices increased 81%, according to NETAR’s Home Sales Report, while the average wage increased 25%, according to the Bureau of Labor Statistics. That pushed many of the homes at the top end of the affordable market into the move-up market with price tags nearing $300K. So, there were fewer affordable homes for sale to locals who were making less money.

Since the post pandemic basement level mortgage rate era, about 60% of the mortgaged properties have a 4% or less rate. That’s locking in owners reluctant to give up the low interest rate for a rate in the 7% range. And the dynamic is choking the inventory flow in all price ranges.

Much of the local pent-up demand is from Millennials who are in their prime home-buying years and the elders of Gen Z.

New residents are also part of the issue. Many have more economic resources from sales of previous homes in higher priced markets. But most, have made buying more competitive at the top end of the affordable and move-up market price ranges.

While new home construction is up, much of it is in the move-up and luxury markets because that is where most of the market is. Simply put, builders make less on affordable homes.

The economic reality is the major driver of the affordable home crunch is fewer homes for sale at a higher price to a local population, making less money. A better affordable housing market will return when the balance between the affordable housing inventory and purchasing power of those buyers returns.

Categories: REAL ESTATE