Thursday, March 24, 2016
The Incredible Vanishing Starter Homes
There are fewer affordable starter homes in 95 of the 100 largest U.S. markets now compared with 2012, according to the real estate research company Trulia.com. Trulia defines a starter as a home that is in the lower third of a market’s valuation and affordable to those making the median income in that market.
What's going on?
According to Ralph McLaughlin, chief economist with Trulia.com, investors bought many foreclosed homes that were likely starter homes during the recession and turned them into rentals, thus keeping them off the sales market. (Note: I reported in the EPJ Daily Alert on these large investors coming into the market in 2012 and urged those considering buying to do so then.)
In 2016, the median starter home list price was $154,156, and a buyer would need to dedicate 37% of his income just to afford it, compared with 32% in 2012, Trulia said.
Those living in Oakland, Calif. may be at the epicenter of the madness.
Home buyers in that city, where the Black Panthers once roamed, would have to spend nearly 70% of their income to afford a 30-year fixed-rate mortgage on a starter home.
There is good news, however, if you live far away from a Fed money pumping spigot.
Markets with starter homes that are affordable for millennials and other first-time buyers — where as little as 5% and no more than 20% of median income is needed to afford a mortgage — do exist,
Some of those markets include Kansas City, Missouri (17% of median income required for a mortgage), Little Rock, Ark. (17%) and Memphis, Tenn. (15.6%), the report noted.
(Chart and dat originally from Trulia)
at 4:10:00 PM