Top Five Cities Where Affordability Declined the Most, According to First American Real House Price Index - Seite 2

1. Kansas City, Mo. (-2.3 percent)
2. Las Vegas (-1.9 percent)
3. Philadelphia (-1.7 percent)
4. Pittsburgh (-1.6 percent)
5. Portland, Ore. (-1.6 percent)

Affordability Story Differs Based on Local Dynamics

“In September, Kansas City, Mo. had the greatest month-over-month decrease in affordability, mostly due to of the 1.7 percent monthly decline in household income, the largest household income decline relative to the other four markets,” said Fleming. “Las Vegas and Philadelphia both had faster nominal house price appreciation than Kansas City, but their household incomes did not decline by nearly as much.

“Finally, the remaining cities on the list, Pittsburgh and Portland, demonstrate the intricate dance between house-buying power and nominal house price appreciation. Pittsburgh and Portland both experienced a 1.6 percent decline in affordability in September, but for different reasons,” said Fleming. “Pittsburgh’s decline in household income was marginal and not enough to offset the affordability boost from lower mortgage rates, so house-buying power improved in the steel city. Yet, Pittsburgh’s nominal house price appreciation was the fastest of the five cities, outpacing house-buying power, so affordability waned. While Portland’s nominal house price appreciation was slower than Pittsburgh, house-buying power declined significantly more due to falling household income, resulting in the same decline in affordability as Pittsburgh.”

What Will Drive Housing Affordability in 2021?

“The good news is that on a year-over-year basis affordability declined in only 13 of the top 50 markets, and housing remains 5 percent more affordable nationally than a year ago. However, the list of markets with declining affordability on an annual and monthly basis has swelled in recent months,” said Fleming. “The growing number of markets where affordability is declining demonstrates the dynamic we expected to see – the strong growth in house-buying power in 2020 has boosted demand in a historically supply-constrained market, putting tremendous upward pressure on nominal house price appreciation.

“Faster nominal house price appreciation can erode, or even eliminate, the boost in affordability from lower mortgage rates, especially if household income growth doesn’t keep up,” said Fleming. “With mortgage rates expected to remain low in 2021 and supply expected to remain constrained, affordability trends will be closely tied to shifts in household income in the months ahead.”