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articles about “Homeownership

Housing’s Millennial Mismatch

Asking prices are rising faster in Gen X, boomer, and senior markets than in millennial markets. But there’s a mismatch in where young adults live versus where they can afford to buy a home. For many millennials, homeownership will require moving to a cheaper market.

Jed Kolko, Chief Economist
December 9, 2014

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

Asking Prices Accelerated in November, Rising 7.4% Year-over-Year

Nationwide, asking prices on for-sale homes jumped 1.5% month-over-month in November, seasonally adjusted — a surprisingly large increase. Future months will tell whether this was a blip or the beginning of a sustained climb. Year-over-year, asking prices rose 7.4%, down from the 10.3% year-over-year increase in November 2013. Asking prices rose year-over-year in 98 of the 100 largest U.S. metros — everywhere but Little Rock and New Haven.

November 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
1.5% N/A 1.6%
Quarter-over-quarter,
seasonally adjusted
3.4% 95 3.5%
Year-over-year 7.4% 98 7.3%
Data from previous months are revised each month, so current data reported for previous months might differ from previously reported data.

Prices Rising Fast in Florida, Slowest in Favorite Millennial Markets

Four of the 10 metros where asking prices rose most year-over-year were in Florida. These Sunshine State markets have older populations, and they all have a lower share of millennials than the national average of 21% and a higher share of baby boomers than the average of 24%. In fact, only one of the 10 markets with the largest price increases in November has a higher share of millennials than the national average—and only slightly (Las Vegas, at 22%).

Where Prices Increased Most in November
# U.S. Metro Y-o-Y % asking price change, Nov 2014 % of population age 20-34 (Millennials) % of population age 50-69 (Boomers)
1 Ventura County, CA 17.2% 20% 24%
2 Palm Bay-Melbourne-Titusville, FL 15.2% 16% 30%
3 North Port-Bradenton-Sarasota, FL 14.7% 14% 30%
4 Oakland, CA 13.4% 21% 24%
5 Cincinnati, OH-KY-IN 13.4% 20% 25%
6 Cape Coral-Fort Myers, FL 13.3% 16% 29%
7 Lakeland-Winter Haven, FL 13.0% 18% 25%
8 Las Vegas, NV 12.9% 22% 23%
9 Detroit, MI 12.9% 20% 25%
10 Atlanta, GA 12.9% 21% 22%
- National average 7.4% 21% 24%
Note: among 100 largest metros. Population shares based on 2013 Census population estimates. To download the list of asking home price changes for the largest metros: Excel or PDF

metro map nov 2014

To see how the age distribution of a metro’s population relates to home prices, we identified the 10 markets with the highest shares of each of four distinct generations: millennials (age 20–34); Gen X (age 35–49); boomers (age 50–69); and seniors (age 70 and up). (See note.) In the 10 markets where millennials account for the largest share of the population, including Austin, San Diego, and Virginia Beach-Norfolk, the average year-over-year price increase was 6.1% — below the 7.4% national increase. Markets with the highest shares of Gen Xers, including Raleigh, San Francisco, and San Jose, averaged price increases of 9.4% — highest among the four age groups. Prices in the favorite markets of seniors, most of which are in Florida, rose 8.6% — also above the national increase.

GenerationalHomePrices

The Millennial Mismatch in Housing Affordability

When young adult renters are asked if they will buy a home someday, a whopping 93% say yes. You’d think it would be good news for them that prices are rising more slowly in the markets where they currently live. Not so fast though. Prices might be rising more slowly in millennials’ favorite metros. But affordability is nonetheless a big challenge in those markets.

To see this, compare the millennial population share in each metro with the percentage of homes for sale that a typical millennial household can afford (from our most recent Middle Class Affordability report — see note below on how we define affordability). In metros with higher millennial shares, homeownership tends to be less affordable for this group. For instance, in Austin, Honolulu, New York, and San Diego, 20–34 year-olds account for at least 23.5% of the population, putting those metros in the top 10 for millennial share. But fewer than 30% of homes for sale in those markets are within reach of the typical millennial household. Some markets with a high millennial share are more affordable, including Oklahoma City and Baton Rouge, but they’re the exception (see note).

LiveVsAfford[2]

Call it the “millennial mismatch.” Millennials can afford markets where they don’t live, but they can’t afford many of the markets where they do live. Many millennials who hope to buy someday will be priced out of the market where they live now. They’ll face a tough choice: Do they keep renting or move to a cheaper market?

Rents Gains Easing Slightly in Most Large Markets

Rents continued to climb. Nationwide, rents rose 6.1% year-over-year in November. Still, rent gains have cooled since August in 14 of the 25 largest rental markets, including the Northern California markets of San Francisco, Oakland, and Sacramento. In November, Denver had the steepest increases in the country, though the typical two-bedroom unit there still rents for less than half of what it would cost in San Francisco or New York. But rent increases could slow next year if new apartment construction finally catches up with demand.

Rent Trends in the 25 Largest Rental Markets
# U.S. Metro Y-o-Y % change in rents, Nov 2014 Y-o-Y % change in rents, Aug 2014 Median rent for 2-bedroom, Nov 2014
1 Denver, CO 14.2% 12.7% 1550
2 San Francisco, CA 12.2% 13.4% 3600
3 Oakland, CA 11.9% 14.3% 2450
4 Baltimore, MD 9.3% 8.1% 1550
5 Phoenix, AZ 8.5% 8.1% 1050
6 New York, NY-NJ 8.3% 5.4% 3400
7 Sacramento, CA 8.2% 13.4% 1200
8 Portland, OR-WA 7.8% 3.5% 1300
9 Philadelphia, PA 7.5% 9.2% 1550
10 Tampa-St. Petersburg, FL 7.4% 5.5% 1150
11 Miami, FL 7.3% 9.0% 2300
12 Los Angeles, CA 7.3% 8.2% 2500
13 Seattle, WA 7.3% 8.5% 1750
14 Orange County, CA 7.3% 4.7% 2100
15 St. Louis, MO-IL 7.3% 6.3% 950
16 Las Vegas, NV 6.5% 5.4% 950
17 Chicago, IL 5.9% 7.2% 1700
18 Riverside-San Bernardino, CA 5.8% 6.1% 1550
19 Dallas, TX 5.7% 4.5% 1400
20 Atlanta, GA 5.6% 7.5% 1200
21 Houston, TX 4.2% 4.2% 1400
22 San Diego, CA 4.0% 6.5% 2000
23 Boston, MA 3.8% 4.5% 2300
24 Washington, DC-VA-MD-WV 3.4% 3.6% 2000
25 Minneapolis-St. Paul, MN-WI 1.8% 1.7% 1300
Note: among 100 largest metros. Population shares based on 2013 Census population estimates. To download the list of rent price changes for the largest metros: Excel or PDF

Note: Data on share of metro population in each age group are from the Census’s 2013 county population estimates. Because the Census reports county population estimates by age in 5-year buckets (20–24, 25–29, etc.), we defined the four age groups as 20–34 (millennials), 35–49 (Gen X), 50–69 (boomers), and 70+ (seniors).

The correlation for the data shown in the scatterplot between millennial share and homeownership affordability for millennials is -0.28 (-0.48 when weighted by metro number of households), which is statistically significant at the 5% level.

We measure affordability as the share of homes for sale on Trulia within reach of the typical millennial household. Our standard is whether the total monthly payment, including mortgage, insurance, and property taxes, is less than 31% of the metro area’s median income for households headed by millennials. The total monthly cost includes the mortgage payment assuming a 4.2% 30-year fixed rate mortgage with 20% down, property taxes based on average metro property tax rate, and insurance. We chose 31% of income as the affordability cutoff to be consistent with government guidelines for affordability.

The Trulia Price Monitor and the Trulia Rent Monitor track asking home prices and rents on a monthly basis, adjusting for the changing composition of listed homes, including foreclosures provided by RealtyTrac. The Trulia Price Monitor also accounts for regular seasonal fluctuations in asking prices in order to reveal underlying price trends. The Monitors can detect price movements at least three months before the major sales-price indexes. Historical data are revised monthly. Thus, historical data presented in the current release are the best comparison with current data. Our FAQs provide the technical details.

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Where Veterans Live

Veterans tend to live in affordable smaller metros and rural areas, near military bases, and in places with fewer immigrants. Among the largest 100 metros, Colorado Springs and Virginia Beach have the highest concentration of veterans, while Miami, New York, and Los Angeles have the lowest.

Jed Kolko, Chief Economist
November 10, 2014

Roughly 1 in 12 civilian adults are veterans. But in some smaller metros that figure is as high as 1 in 5, while in several large metros it’s just 1 in 20. We’re marking Veterans Day the Trulia way, by taking a look at where people who served their country in the armed forces live.

Basic Training on Veteran Demographics and Homeownership

Where veterans live reflects who they are. Veterans tend to be older. Their median age is 64, nearly two decades older than the 45-year-old median age of civilian adults who didn’t serve in the armed forces. Gulf War veterans are relatively young, with a median age of 41. But they’re outnumbered by Vietnam Era vets, whose median age is 65. Veterans of the Korean War and World War II are older still.

War or Era Served In

Share of civilian adult population Median age
Gulf War 2.2% 41
Vietnam Era 2.9% 65
Korean War 0.9% 81
World War II 0.5% 88
All veterans
8.1% 64

Note: Some veterans served in multiple wars or eras, and others served only between wars and eras. Therefore, data for “all veterans” does not equal the sum or average of the above rows in the table.

Veterans are also overwhelming male (92%), and born in the U.S. Just 3% of veterans are foreign-born, compared with 17% of the non-veteran civilian population.

Finally, veterans are more likely to be homeowners than other adults. Households headed by veterans have a 79% homeownership rate, significantly higher than the 63% rate for households headed by civilian non-veterans. Age accounts for most of this gap. As we noted, there’s a two-decade age gap between veterans and non-veteran civilians, and, except for the very old, the homeownership rate is higher for older adults. Nevertheless, even adjusting for this age difference, homeownership is still about seven percentage points higher for veterans, thanks in part to U.S. Department of Veterans Affairs loan programs (VA loans) and other incentives.

As we’ll see below, these demographic differences help explain where veterans live.

Top Veteran Areas are Smaller Metros Near Military Bases

Veterans tend not to be concentrated in big cities. They account for only 6.4% of the civilian adult population in big, dense cities (see note). But they make up 11.2% in small towns and rural areas.

VeteranGraph

Because veterans tend to live outside larger markets, we looked at the largest 500 metros rather than just the 100 largest, as we typically do in Trulia Trends. In 7 of the 500 largest metros, veterans represent more than 20% of the civilian adult population. The 10 metros with the highest share of veterans have one thing in common: they are affordable. Their median asking price per square foot is below $150 in all but Oak Harbor, WA. Several of these metros have large military bases, including Camp Lejeune in Jacksonville, NC; Fort Hood in Killeen-Temple-Fort Hood, TX; and Fort Sill in Lawton, OK.

Metros with Highest Veteran Share

# U.S. Metro Veteran Share of Civilian Adult Population Median Asking Home Price Per Square Foot, $
1 Crestview-Fort Walton Beach-Destin, FL 22.3% 137
2 Oak Harbor, WA 22.0% 173
3 Jacksonville, NC 21.4% 110
4 Killeen-Temple-Fort Hood, TX 21.2% 82
5 The Villages, FL 20.4% 122
6 Sierra Vista-Douglas, AZ 20.2% 91
7 Fayetteville, NC 20.0% 86
8 Lawton, OK 19.6% 75
9 Clarksville, TN-KY 19.2% 91
10 Bremerton-Silverdale, WA 19.1% 142
Note: among 500 largest U.S. metros. Veteran share is from Census; home prices from Trulia.

None of the 100 largest metros makes the list. In fact, the largest of the top 10 is Killeen-Temple-Fort Hood, TX, which ranks just 153rd in population nationwide. Among the largest 100, Colorado Springs and Virginia Beach-Norfolk have the highest share of veterans. Both also have major military bases. Even among these larger metros with high concentrations of veterans, housing is relatively affordable.

Metros with Highest Veteran Share (Large Metros Only)

# U.S. Metro Veteran Share of Civilian Adult Population Median Asking Home Price Per Square Foot, $
1 Colorado Springs, CO 18.4% 107
2 Virginia Beach-Norfolk, VA-NC 17.8% 129
3 Palm Bay-Melbourne-Titusville, FL 16.4% 100
4 Tacoma, WA 15.2% 134
5 North Port-Bradenton-Sarasota, FL 14.4% 150
6 Jacksonville, FL 14.0% 109
7 Charleston, SC 13.2% 134
8 Cape Coral-Fort Myers, FL 13.1% 133
9 San Antonio, TX 12.9% 107
10 Tucson, AZ 12.5% 111
Note: among 100 largest U.S. metros ONLY. Veteran share is from Census; home prices from Trulia.

Where are veterans scarce? Of the largest 500 metros, the 10 with the lowest share include several large metros: Miami, New York, Los Angeles, San Jose, and San Francisco. But the list also includes Laredo and McAllen-Edinburg-Mission, TX, and El Centro, CA, on the Mexican border. Five of the bottom 10 are expensive markets, with prices over $300 per square foot: New York, the 3 big California metros, and Edwards, CO, which includes the Vail ski resort.

Metros with Lowest Veteran Share

# U.S. Metro Veteran Share of Civilian Adult Population Median Asking Home Price Per Square Foot, $
1 Miami, FL 3.2% 180
2 Laredo, TX 3.7% 94
3 New York, NY-NJ 3.8% 320
4 McAllen-Edinburg-Mission, TX 4.6% 82
5 Los Angeles, CA 4.6% 334
6 San Jose, CA 5.1% 430
7 Edwards, CO 5.2% 336
8 Provo-Orem, UT 5.4% 96
9 El Centro, CA 5.4% 116
10 San Francisco, CA 5.5% 613
Note: among 500 largest U.S. metros. Veteran share is from Census; home prices from Trulia.

So what can we say in general about where veterans live? The map shows no clear regional pattern. Many western states have pockets where veterans live, but California has relatively few veterans. Florida includes the metro with the highest share of veterans, Crestview-Fort Walton Beach-Destin, and the lowest, Miami. Texas has Killeen-Temple-Fort Hood, with a high proportion of veterans, and border towns with low concentrations.

veterans county map

 

Still, we can make some generalizations. We should note first though that where veterans live depends on when they served. Gulf War vets tend to live in different places than World War II vets, not least because they’re on average more than four decades younger.

In sum, veterans are more likely to live:

  1. Near military bases and areas with active-duty residents. This is especially true for Gulf War veterans.
  2. In more affordable, lower density areas. Vietnam Era veterans, in particular, are more likely than other veterans or civilian non-veterans to live in small towns and rural areas.
  3. In areas with a lower share of foreign-born residents, especially older vets.
  4. In retirement areas, especially if they’re Korean War or World War II vets. In fact, the metros with the highest shares of these older veterans are in Florida.

Though their share of the population may vary, veterans can be found in nearly every community in America. If you want to thank a veteran on November 11, you probably won’t have to look far.

 

Notes: the Census identifies veterans as serving in the Gulf War, the Vietnam Era, the Korean War, and World War II, as well as between conflicts. See tables S2101 and B21002 in American FactFinder.

Homeownership rates are calculated from the 2013 American Community Survey (ACS) Public Use Microdata Sample (PUMS) and are based on whether the head of household, spouse, or unmarried partner is a veteran.

All national figures are based on the 2013 1-year ACS. All metro and county figures are based on the 2012 5-year ACS, covering the period 2008-2012. Nationally, veteran share of the civilian population was 8.1% in the 2013 ACS and 9.3% in the 2012 5-year ACS.

County density is based on tract-weighted density, and quartiles were defined to be roughly equal in total population.. See note to this post for more detail.

To identify the location of military bases, we used Census data on the share of adults currently in the armed forces (which not does include veterans) from table DP03 in American FactFinder.

 

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What Home Price Slowdown? Some Markets Buck the Trend

Jed Kolko, Chief Economist
November 6, 2014

Asking prices are rising more slowly now than a year ago. The price slowdown in especially sharp in California and the Southwest. Nevertheless, in 40 of the 100 largest markets, price gains have accelerated.

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

Asking Prices Rose 6.4% Year-over-Year in October

Nationally, the month-over-month increase in asking home prices rose to 1.0% in October. Year-over-year, asking prices rose 6.4%, down from the 10.6% year-over-year increase in October 2013. Asking prices rose year-over-year in 91 of the 100 largest U.S. metros.

October 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
1.0% N/A 1.1%
Quarter-over-quarter,
seasonally adjusted
2.2% 90 2.2%
Year-over-year 6.4% 91 6.1%

Data from previous months are revised each month, so data being reported now for previous months might differ from previously reported data.

Price Gains Aren’t Slowing Everywhere

Nationally, year-over-year price gains have slowed from a year ago. In some markets, this price slowdown has been precipitous. In the most extreme case, Las Vegas prices rose 10.1% in October 2014 versus 31.9% in October 2013, a drop of 21.8 percentage points. Price gains have slowed by almost 20 percentage points in both Northern California (Sacramento, Oakland) and Southern California (Riverside-San Bernardino, San Diego) markets. Among the 10 markets with the largest price slowdowns, only one – Warren-Troy-Farmington Hills, next to Detroit – is outside California or the Southwest.

Nationally, price gains have slowed in 60 of the 100 largest metros, although prices are actually falling year-over-year in only nine metros.

Where Price Gains Have Slowed Most
# U.S. Metro Y-o-Y % asking price change, Oct 2014 Y-o-Y % asking price change, Oct 2013 Difference in price change, Oct 2014 vs Oct 2013, percentage points
1 Las Vegas, NV 10.1% 31.9% -21.8%
2 Sacramento, CA 10.0% 29.8% -19.9%
3 Riverside-San Bernardino, CA 9.1% 28.4% -19.3%
4 San Diego, CA 2.0% 21.0% -19.0%
5 Oakland, CA 11.3% 29.9% -18.6%
6 Bakersfield, CA 6.8% 24.6% -17.8%
7 Orange County, CA 5.1% 21.5% -16.4%
8 Los Angeles, CA 6.0% 22.0% -16.0%
9 Warren-Troy-Farmington Hills, MI 8.3% 22.6% -14.3%
10 Phoenix, AZ 4.2% 18.4% -14.2%
Note: among 100 largest metros. Differences in price gains were calculated before rounding. To download the list of asking home price changes for the largest metros: Excel or PDF

Where then are the 40 metros where prices have accelerated? They’re concentrated in the Midwest and the South. Prices gains have accelerated most in Dayton, Louisville, and Akron. However, the speed-ups aren’t as dramatic as the slowdowns. In no metro have prices accelerated by more than 10 percentage points. Dayton comes closest at 9.1 percentage points. By contrast, prices have slowed by more than 10 percentage points in 12 metros, including Orlando and Fort Lauderdale in addition to the 10 listed above.

Where Price Gains Have Accelerated Most
# U.S. Metro Y-o-Y % asking price change, Oct 2014 Y-o-Y % asking price change, Oct 2013 Difference in price change, Oct 2014 vs Oct 2013, percentage points
1 Dayton, OH 8.9% -0.2% 9.1%
2 Louisville, KY-IN 10.7% 2.1% 8.6%
3 Akron, OH 5.9% -0.7% 6.5%
4 Palm Bay-Melbourne-Titusville, FL 13.5% 7.9% 5.6%
5 Toledo, OH 9.2% 3.9% 5.3%
6 Gary, IN 8.3% 3.1% 5.1%
7 Tulsa, OK 7.8% 2.9% 4.9%
8 Pittsburgh, PA 5.7% 1.0% 4.7%
9 Virginia Beach-Norfolk, VA-NC 5.1% 0.7% 4.4%
10 Syracuse, NY 4.5% 0.4% 4.1%
Note: among 100 largest metros. Differences in price gains were calculated before rounding. To download the list of asking home price changes for the largest metros: Excel or PDF

Thus, the price deceleration is very pronounced in some markets, but by no means universal. In fact, the slowdown represents continued fallout from the housing crisis. Metros where the past decade’s housing crisis was especially severe (see note) experienced huge price rebounds last year, rates of increase that couldn’t be sustained. On average, these severely hit markets notched almost 20% price gains year-over-year in October 2013, compared with 7.9% in October 2014. Things that can’t last forever, don’t. And double-digit home-price increases are a prime example of something that can’t last forever. By contrast, markets that had a moderate housing bust experienced a gentler rebound in 2013 and slowdown in 2014. Markets that had only a mild housing bust have seen year-over-year price gains ease back just slightly, from 6.8% in October 2013 to 6.2% in October 2014.

Still, even with the sharp price slowdown in the severely hit markets, in October 2014 asking prices still rose more year-over-year in markets where the housing bust was severe than in moderate or mild markets.

HousingBustGraph

Rents Rising Fast in the Least Affordable Rental Markets

Nationally, rents rose 6.2% year-over-year in October. But in the markets where renters are stretched thinnest, rents are rising even faster. In Miami, Los Angeles, and New York, the median rent on a 2-bedroom unit equals more than half of the average monthly wage, and it’s nearly that much in Oakland and San Francisco. In all five of these least-affordable markets, rents rose 7.8% or more year-over-year. The rental affordability crisis is getting worse in the markets where it’s already bad – and that may hold until apartment construction brings more units onto the market.

 

Rent Trends in the 25 Largest Rental Markets
# U.S. Metro Y-o-Y % change in rents, Oct 2014 Median rent for 2-bedroom, Oct 2014 Median rent for 2-bedroom, as share of average local wage
1 Miami, FL 7.8% 2400 61%
2 Los Angeles, CA 8.3% 2550 56%
3 New York, NY-NJ 7.8% 3450 55%
4 Oakland, CA 13.3% 2550 49%
5 San Francisco, CA 14.4% 3600 49%
6 Riverside-San Bernardino, CA 6.1% 1550 46%
7 Orange County, CA 6.8% 2100 46%
8 San Diego, CA 5.3% 2000 44%
9 Boston, MA 4.2% 2300 40%
10 Chicago, IL 5.9% 1700 37%
11 Washington, DC-VA-MD-WV 4.0% 2050 35%
12 Baltimore, MD 8.4% 1550 35%
13 Denver, CO 14.3% 1550 33%
14 Philadelphia, PA 7.7% 1600 33%
15 Seattle, WA 8.5% 1750 32%
16 Tampa-St. Petersburg, FL 6.6% 1150 31%
17 Portland, OR-WA 5.9% 1300 31%
18 Dallas, TX 5.7% 1400 29%
19 Houston, TX 4.9% 1500 29%
20 Sacramento, CA 9.6% 1250 29%
21 Atlanta, GA 6.1% 1250 28%
22 Minneapolis-St. Paul, MN-WI 0.6% 1300 28%
23 Las Vegas, NV 5.8% 1000 28%
24 Phoenix, AZ 8.2% 1050 26%
25 St. Louis, MO-IL 5.9% 950 24%
Note: average local wage is from the Quarterly Census of Employment and Wages for full-year 2013.

 

The next Trulia Price Monitor and Trulia Rent Monitor will be released on Tuesday, December 9.

The severity of the housing crisis for each metro is based on peak-to-trough price declines in the Federal Housing Finance Agency’s home price index.

The Trulia Price Monitor and the Trulia Rent Monitor track asking home prices and rents on a monthly basis, adjusting for the changing composition of listed homes, including foreclosures provided by RealtyTrac. The Trulia Price Monitor also accounts for regular seasonal fluctuations in asking prices in order to reveal underlying price trends. The Monitors can detect price movements at least three months before the major sales-price indexes. Historical data are revised monthly. Thus, historical data presented in the current release are the best comparison with current data. Our FAQs provide the technical details.

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Blue Markets Face Bigger Housing Challenges Than Red Markets

Jed Kolko, Chief Economist
October 27, 2014

The housing crisis hurt Democratic- and Republican-leaning markets similarly, but today blue markets have lower affordability, lower homeownership, and greater income inequality.

As Election Day 2014 approaches, we see sharp differences in local housing markets depending on whether they are blue or red. As the political urgency of the housing crisis fades, longer-term issues like declining affordability, low homeownership, and rising inequality are taking center stage. And these issues play out differently in Democratic- and Republican-leaning metros.

To show this, Trulia categorized the 100 largest metros as red or blue depending on their 2012 presidential vote. In 32 metros—the red markets—the Republican candidate, Mitt Romney, got more votes than the Democrat, President Obama. These include places like HoustonCincinnati, and Salt Lake City. In 40 light-blue markets, including St. LouisAustin, and Buffalo, Obama beat Romney by less than 20 percentage points. And in 28 dark-blue markets, including Los AngelesNew York, and San Francisco, Obama’s margin exceeded 20 points.

When we looked at housing trends in these metros, we found that the housing crisis and recovery affected red and blue markets similarly. But today’s pressing housing issues are more severe in blue markets.

The Housing Crisis Hit Both Red and Blue America

When the housing bubble of the mid-2000s burst, both red and blue markets felt the pain. The markets with the most severe housing busts included dark-blue metros like Detroit and Oakland as well as red markets like Bakersfield and Cape Coral – Fort Myers, FL. The peak-to-trough price decline averaged 16% in red markets, 26% in light-blue markets, and 25% in dark-blue markets. But the relationship between price declines and redness or blueness was not statistically significant. (See note.)

Nor does the recent recovery show any clear bias toward red or blue markets. In September 2014, home prices were up 7.0% year-over-year in red markets, 6.2% in light-blue markets, and 6.3% in dark-blue markets. The markets with the largest price increases included red metros like Palm Bay-Melbourne-Titusville, FL, and Birmingham, AL, and dark-blue metros like Miami and Toledo, OH. The relationship between year-over-year price increases and 2012 voting patterns is not statistically significant. Another recovery measure, the share of homes in foreclosure, also doesn’t show a statistically significant correlation with 2012 voting patterns.

Key Housing Data in the Reddest Metros
U.S. Metro 2012 Vote Margin: Obama vs. Romney Price Decline in Housing Bust, Peak-to-Trough Year-Over-Year Price Change, Sept. 2014 Median Asking Price Per Square Foot, $
1 Knoxville, TN -34% -8% 2.1% $98
2 Tulsa, OK -32% -4% 7.3% $90
3 Greenville, SC -30% -8% 5.9% $92
4 Oklahoma City, OK -27% -3% 4.0% $98
5 Fort Worth, TX -23% -6% 6.4% $94
6 Salt Lake City, UT -21% -22% 4.7% $129
7 Colorado Springs, CO -21% -12% 4.0% $107
8 Birmingham, AL -20% -13% 11.5% $96
9 Jacksonville, FL -19% -38% 7.0% $109
10 Bakersfield, CA -17% -52% 8.2% $126

Note: among 100 largest U.S. metros. Reddest metros are those with highest negative margin for Obama vs. Romney in 2012. See blogpost note for data sources. Data for all 100 metros available here.

Key Housing Data in the Bluest Metros
U.S. Metro 2012 Vote Margin: Obama vs. Romney Price Decline in Housing Bust, Peak-to-Trough Year-Over-Year Price Change, Sept. 2014 Median Asking Price Per Square Foot, $
1 San Francisco, CA 58% -23% 9.9% $613
2 Oakland, CA 50% -39% 11.9% $342
3 New York, NY-NJ 49% -18% 4.3% $320
4 Detroit, MI 47% -40% 11.4% $75
5 San Jose, CA 42% -26% 8.6% $430
6 Los Angeles, CA 42% -35% 6.9% $334
7 Honolulu, HI 39% -11% 4.1% $439
8 Washington, DC-VA-MD-WV 37% -25% 3.2% $177
9 Fort Lauderdale, FL 35% -48% 6.9% $143
10 Seattle, WA 35% -26% 8.9% $197
Note: among 100 largest U.S. metros. Bluest metros are those with highest positive margin for Obama vs. Romney in 2012. See blogpost note for data sources. Data for all 100 metros available here.

 

 

Affordability Is a Bigger Problem for Blue Markets

Things look fundamentally different when we compare red and blue markets in terms of affordability and related measures. The tables above show that none of the 10 reddest markets had a median asking price per square foot above $130 in Sept. 2014. But nine of the 10 bluest markets did. Looking across all 100 largest metros, the correlation between price-per-square-foot and 2012 vote margin was positive, high (0.63), and statistically significant. In fact, the only expensive red market was Orange County, CA, at $363 per square foot. There was a huge drop-off to the next-most-expensive red market—North Port-Bradenton-Sarasota, FL, at $150 per square foot.

When we plot local market home price per-square-foot and the 2012 presidential vote, we see that most of the red metros are clustered in the lower left-hand corner of the figure, where prices were lowest.

margin-vs-ppf

Strikingly, housing costs nearly twice as much in dark-blue markets ($227 per square foot) than in red markets ($119).

MedianAskingPrice

Sure, households in blue markets tend to have higher incomes. But those higher incomes are not enough to offset higher home prices. Our middle-class affordability measure, which reflects the share of homes for sale within reach of a median-income household, is significantly lower in bluer markets. Furthermore, blue markets have lower homeownership and greater income inequality than red markets. As with affordability, the relationships between homeownership and inequality on one hand and 2012 voting patterns on the other hand are statistically significant.

What does all this mean? The point is not that Democrats cause expensive housing, lower homeownership, or greater inequality. Determining whether and how the political views of voters or their elected officials affect local housing markets is the stuff of scholarly research, not short blogposts. But because blue markets are less affordable, have lower homeownership, and have greater income inequality, political leaders in Democratic-leaning and Republican-leaning metros may push for different policies.

Furthermore, these local differences in home prices mean that some national housing policies favor red markets and others blue markets. For instance, the current system of conforming loan limits benefits red markets more because homes in those markets are likelier to fall within local loan limits. But the mortgage interest deduction benefits blue markets more, thanks to higher home prices and more residents in higher tax brackets. Such differences could make it harder to reform these long-standing policies. In short, the differences between blue and red local housing markets may add to the challenge of reaching agreement on national housing policies.

Note: Metro-level 2012 Presidential election data are aggregated from county-level data in the Atlas of U.S. Presidential Elections. Peak-to-trough price declines are calculated from the Federal Housing Finance Agency House Price Index. Year-over-year price changes and median asking prices per square foot are from the Trulia Price Monitor. Correlations mentioned in this post are metro-level, weighted by number of households in the metro, and statistically significant if p<.05. The correlation of price per square foot and vote margin is calculated using the natural log of price per square foot.

 

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Are We Building Too Many Single-Family Homes?

The vacancy rate for single-family homes increased in 2013 and remains well above bubble and pre-bubble levels.

Jed Kolko, Chief Economist
September 17, 2014

What? Too much new single-family construction? It sounds hard to believe, with only 618,000 single-family housing starts in 2013, heading toward 622,000 in 2014 – far below the pre-bubble average of 1.1 million per year in the 1990s. Even when adding in multi-unit building, which is booming, construction remains a laggard in the housing recovery and is contributing less than it should to employment and economic growth.

Of course, the historical norm doesn’t tell us what the just-right level of construction is now. That depends on the rate at which new households are formed. If new construction runs ahead of household formation, more homes sit empty and the vacancy rate rises. In 2004 and 2005, during the bubble, construction of single-family homes soared to over 1.5 million units. Then, during the bust, household formation slowed, in part because more young people lived with parents. Too much housing and too few households were a dangerous cocktail during the housing bust and recession, causing the vacancy rate to climb until 2010. Since then, the vacancy rate has fallen, but single-family construction has continued to wallow near all-time lows.

Newly released data from the Census Bureau’s American Community Survey (ACS) show that the vacancy rate for single-family homes actually ticked up a bit in 2013. That’s a big surprise. It suggests even today’s low level of single-family construction might still be too much, too soon. To determine whether we’re building too many homes, we need first to understand household formation, and then the vacancy rate.

Single-Family Rentals Increased Despite Low Household Formation Rate
To understand what’s happening with vacancy rates, let’s start by looking at changes in households and housing units in the past year broken down by owner-occupied and rented, and single-family and multi-unit:

Type of unit Change, 2012 to 2013, ‘000s Change, 2012 to 2013, % Change, 2006 to 2013, ‘000s Change, 2006 to 2013, %
Owner-occupied single-family -184 -0.3% -428 -0.7%
Renter-occupied single-family 331 2.3% 3540 31.2%
Owner-occupied multi-unit (i.e. condos) 18 0.5% -269 -6.4%
Renter-occupied multi-unit (i.e. apartments) 263 1.0% 2259 9.7%
Total single-family units, incl. vacant 226 0.3% 4701 5.5%
Total multi-family units, incl. vacant 199 0.6% 2131 6.5%
Total housing units, incl. vacant 356 0.3% 6496 5.1%
Total households 321 0.3% 4674 4.2%
Note: total housing units and total households include mobile homes, boats, RV’s, vans, etc. and their occupants.

… continue reading

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