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articles about “Affordability

Cutting Housing Costs When Financial Hardship Strikes

If forced to spend less on housing, people would rather change where they live than whom they live with. Downsizing is the #1 way people would reduce their housing costs. Furthermore, renters are significantly more willing to move or get a roommate than homeowners are.

In good economic times as well as in bad, financial hardship can always strike. And when it does, people might have to cut back on housing, which is typically the largest household expense. However, cutting housing costs involves hard tradeoffs: moving can be expensive and a hassle, and living with family, friends, or strangers can be a challenge. To understand how people might make these tradeoffs, we asked 2,048 Americans in late March and early April 2014 the following question:

“If you experienced a major financial hardship (e.g., lost your job, unexpected medical bills), and you needed to cut back significantly on your housing costs, which of the following would you most likely do? Please select all that apply.”

Here’s what they told us.

Everyone’s Top Cost-Cutting Strategy: Downsizing
Facing financial hardship that required cutting back on housing, nearly 2 in 5 people (38%) would move to a smaller home — more than any other option by a wide margin. In fact, twice as many people would prefer downsizing than the next most popular actions of (1) renting out part of their home to a roommate or housemate or (2) moving to a more affordable neighborhood. Far fewer people would take the more radical actions of living in their car or not paying the rent or mortgage.

How Would You Cut Your Housing Costs If Hit With A Major Financial Hardship? Share
Move to a smaller home/apartment 38%
Rent out part of my home to a roommate/housemate 19%
Move to a more affordable neighborhood in the same city, metro area, or region 19%
Move to a more affordable city, metro area, or region 16%
Move into my parents’ home 14%
Move into my children’s (or other relative’s) home 8%
Rent out part of my home to vacationers/visitors 6%
Live in my car, office, or another place that’s not intended as housing 5%
Move into a non-relative’s home 4%
I would stay in my current home but stop paying the rent or mortgage 4%

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Despite Home Price Slowdown, Wages Can’t Keep Up With Prices

Asking home prices rose faster than wages in 95 of 100 metros. Still, home prices were flat or falling quarter-over-quarter in the formerly booming markets of Las Vegas, Phoenix, Sacramento, and Orange County.

The Trulia Price Monitor and the Trulia Rent Monitor are the earliest leading indicators of how asking prices and rents are trending nationally and locally. They adjust for the changing mix of listed homes and therefore show what’s really happening to asking prices and rents. Because asking prices lead sales prices by approximately two or more months, the Monitors reveal trends before other price indexes do. With that, here’s the scoop on where prices and rents are headed.

Prices Rise 8.1% Year-over-Year in June
Both the quarter-over-quarter and year-over-year increases are lower than they were twelve months ago. In June 2014, prices were up 8.1% year-over-year and 2.6% quarter-over-quarter, compared with 9.5% and 3.1%, respectively, in June 2013.

But despite this national slowdown in price gains, price increases continue to be widespread, with 97 of 100 metros posting year-over-year price gains – the most since the recovery began. Furthermore, asking prices in June rose at their highest month-over-month rate (1.2%) in sixteen months.

Trulia_PriceMonitor_LineChart_June2014

June 2014 Trulia Price Monitor Summary
% change in asking prices # of 100 largest metros with asking-price increases % change in asking prices, excluding foreclosures
Month-over-month,
seasonally adjusted
1.2% N/A 1.2%
Quarter-over-quarter,
seasonally adjusted
2.6% 94 2.5%
Year-over-year 8.1% 97 7.4%
*Data from previous months are revised each month, so data being reported now for previous months might differ from previously reported data.

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Where Buying a Home is Within Reach of the Middle Class

More than four out of five homes for sale in Detroit and Cleveland are within reach of the middle class, compared with one out of four in New York and Los Angeles and one out of seven in San Francisco. Middle-class affordability is worsening in expensive markets and won’t improve long-term without more construction.

Where can the middle class afford to buy a home today? Affordability has worsened in the past year, as home prices have climbed faster than incomes and mortgage rates have risen. But compared with the longer-term past, homeownership still looks relatively affordable: home prices are still undervalued and mortgage rates remain near historic lows. In most U.S. markets, the majority of homes for sale are within reach of the middle class, and buying is cheaper than renting in all of the 100 largest metros.

However, in many markets, especially along the coasts, homeownership is out of reach for the middle class. Even having a college degree is no guarantee that homeownership is within reach in the priciest markets. There’s no easy way to make housing more affordable, though new construction can help.

As in our inaugural middle-class affordability report, we calculated the share of for-sale homes on Trulia that are affordable to a middle-class household, based on whether the total monthly payment – mortgage, insurance, and property taxes – was less than 31% of the metro area’s median household income. (See note below.) Because we define “middle class” separately for each metro based on the local median household income, our affordability measure takes into account that a middle-class income is higher in some markets than in others.

For instance, for a middle-class family in the Denver metro area, where median household income is just under $62,500, homes priced under $325,000 are within reach based on the 31% guideline. Of the homes listed for sale in Denver on May 6, 2014, 50% cost less than that – which means that half of Denver homes are within reach of the middle class.

Trulia_MiddleClassReport_Infographic

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How Special Are Million-Dollar Listings?

Homes that cost a million dollars or more are rare in most of the country but make up more than 20% of the for-sale market in San Francisco, Fairfield County, and San Jose. The typical million-dollar listing in New York is smaller than the average American home.

Close your eyes and imagine a million-dollar home. Depending on where you live, you might be picturing the modest three-bedroom down the street, or you might be thinking of a sprawling mansion. You might even be drawing a blank if you live in a market where million-dollar homes are almost unheard of.  While a home listed for a million dollars might cause just a shrug in some parts of California and New York, million-dollar homes are few and far between once you get more than a couple hours’ drive from an ocean. To see what a million bucks buys across the country, we calculated the share of for-sale listings on Trulia priced at or above $1,000,000 in each of the 100 largest metros, as well as the typical size of homes priced at or near the million-dollar mark, all as of March 3, 2014.

MillionDollarHomesComparison

In Most Metros, Million-Dollar Homes Represent Just a Sliver of the Market
Nothing drives home the huge differences in housing costs across the country more than how rare or common million-dollar homes are. Million-dollar homes account for more than 20% of listings in New York, neighboring Fairfield County, CT, and Long Island; in Orange County and Ventura County, on the southern California coast; and in San Francisco and San Jose. In fact, million-dollar homes make up close to half the San Francisco market, at 44%.

# U.S. Metro Share of for-sale listings priced at or above $1,000,000
1 San Francisco, CA

43.5%

2 Fairfield County, CT

29.7%

3 San Jose, CA

25.7%

4 Orange County, CA

24.4%

5 Ventura County, CA

21.5%

6 New York, NY-NJ

20.8%

7 Long Island, NY

20.5%

8 Honolulu, HI

19.8%

9 Los Angeles, CA

18.4%

10 San Diego, CA

18.0%

For the share of listings priced at or above $1,000,000 in all of the 100 largest metros, click here.

But in 68 of the 100 largest metros, million-dollar homes make up less than 5% of the for-sale market, including the major metros of Philadelphia, Chicago, Dallas, Houston, and Atlanta. Furthermore, million-dollar homes are less than 2% of the market in 44 of the 100 largest metros. … continue reading

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America’s Most Unequal Metros

Income inequality is highest in Fairfield County, CT, San Francisco, New York, Boston, and Detroit. Overall, the most imbalanced U.S. metros tend to have worse housing affordability and slower job growth. But the trend is clear: the gap between the rich and poor has increased in 94 of the 100 largest metros since 1990 – and has even accelerated in the past few years.

Income inequality has been growing in America, driven by technology, globalization, and other factors. It’s caused tensions between the haves and have-nots, which often get played out at the local level, and these tensions have erupted into fights over housing affordability and public services.

Are growing income gaps limited to particular metros, or is this trend widespread? To untangle the facts about local income inequality, we compared the incomes of rich, median, and poor households in the 100 largest metros in 2012, 2006, 2000, and 1990, using Census data (see note below). A rich household is defined as being at the 90th percentile – which means being above 90% of all households in the metro; the median is at the 50th percentile, while poor is defined as at the 10th percentile. Our main inequality measure is the ratio of incomes at the 90th and 10th percentiles (the “90/10 ratio”), which shows the size of the gap between the rich and the poor. A higher value of the ratio means incomes are more unequal; among the 100 metros, the 90/10 ratio ranges from below 9 to above 18.

Taking this approach, we found that some metros are much more unequal than others, and the most unequal metros tend to have higher housing costs and slower economic growth. Despite these differences, income inequality has increased in nearly all metros over the past two decades and has accelerated in recent years.

Income Gap Widest in Fairfield County, San Francisco, and New York
The most unequal metro in America isn’t a well-known big city; it isn’t even bankrupt or overrun with rich tech workers. It’s Fairfield County, CT, home to the tony towns of Darien and Weston but also to the city of Bridgeport, where one third of children are below the official poverty level today and which tried to go bankrupt back in 1991. There, the 90th percentile of income is 18.5 times the 10th percentile. San Francisco, New York, Boston, and Detroit – which did successfully go bankrupt last year – round out the top five. Among the top 10 most unequal metros, four are in New England.

Where Income Inequality Is Highest

# U.S. Metro 90/10 ratio, 2012
1 Fairfield County, CT

18.5

2 San Francisco, CA

17.9

3 New York, NY-NJ

17.7

4 Boston, MA

16.2

5 Detroit, MI

15.2

6 Miami, FL

15.1

7 Philadelphia, PA

14.7

8 Springfield, MA

14.2

9 Peabody, MA

14.0

10 Toledo, OH

13.9

Note: the 90/10 ratio is the ratio of income at the 90th percentile to income at the 10th percentile, for a given metro. A higher ratio means greater income inequality. For the 90/10 ratio for the 100 largest metros, click here.

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