SAN FRANCISCO–The American dream of homeownership is getting more difficult to achieve; difficulty that won’t be getting any easier as rates continue rising and other factors come into play.
Among those other factors, according to data from Trulia.com, is an ongoing shortage of affordable homes for first-time homebuyers. Trulia reported its analysis found the number of affordable homes on the market for the average first-time homebuyers this year took its biggest year-over-year drop in three years, falling 12.1%.
Although incomes are up, home prices have been rising even faster in many cities, the company said. Trulia.com’s research found that to afford the median-priced starter home, first-time buyers, on average, now have to pay some 39% of their monthly income — up 2% in three years. But mortgage lenders have held the line on strict credit and income standards when they approve a mortgage. As a result, there's a squeeze on the supply of starter homes, Trulia said.
Households moving up to a larger home have it a lot easier, Trulia reported. A buyer of a so-called "trade-up" home needs just 25.5% of their monthly income. Buyers at the upper end need just 14% of monthly income to afford a premium home, according to Trulia's data.
Housing affordability also depends on where a home shopper lives. Most major cities in California, for instance, are unaffordable for first time shoppers. The best bet for first-timers, Trulia found, is in the Midwest.
In roughly half of the top 100 cities in Trulia's analysis, first-time buyers with 33% of the local median income could afford to buy the median-priced starter home.