Home Unaffordability Is Spurring Some Buyers to Act

Blomquist: “After a nine-year high in home sales in 2015, we are on pace so far in 2016 to see an even higher number of sales—which in turn indicates buyers are confident and competing in this highly competitive market.”

IRVINE, CA—Counter to what one would expect, many consumers are starting to get caught up in the home-buying frenzy, believing that if they don’t buy now, they may miss out on buying a home, RealtyTrac ‘s VP Daren Blomquist tells GlobeSt.com. According to a recent report from the firm, some markets are becoming increasingly less affordable than they were a year ago. In Q1, 9% of US county housing markets were less affordable than their historically normal levels, up from 2% of markets that exceeded historic home affordability levels a year ago. We spoke exclusively with Blomquist about this pricing trend and how consumers are responding to it. GlobeSt.com: How are consumers responding to the increasing velocity of home unaffordability in some markets? Blomquist: From what we hear from local brokers, many consumers are starting to get caught up in the buying frenzy, believing that if they don’t buy now they may miss out on buying a home. Certainly, that is not all consumers, but that is much of what we’re hearing. And our data bears that out also, with January home sales numbers 3% higher than last January, and February numbers on pace to be above last February as well. This indicates that after a nine-year high in home sales in 2015, we are on pace so far in 2016 to see an even higher number of sales—which in turn indicates buyers are confident and competing in this highly competitive market. GlobeSt.com: Are potential homebuyers shifting their focus to less-desirable homes and/or markets just to get in the game, or are they simply waiting longer to buy and remaining renters instead? Blomquist: A bit of both, depending on the individual situation and whether there is good public transportation in a given market. In places like Southern California with less good public transportation, folks are tending to stay put and hold out until they can find something close to the amenities they want (most importantly a job ). If they don’t stay put they will more likely move outside of Southern California completely to a more affordable market with jobs and other amenities they want (places like Austin, Denver or Portland). On the other hand, in a highly unaffordable market like New York with robust public transportation, you’re more likely to see would-be buyers move to cities further out—as long as they’re on the train line. We even hear about folks commuting from Philadelphia, which is about a 55-minute train ride from New York. But homes are much more affordable there, and it still has many of the big-city amenities these buyers are interested in. GlobeSt.com: What do you foresee happening to home affordability in these markets? Blomquist: It will likely get worse before it gets better, meaning they will become less affordable. There is no immediate sign that the spigot of foreign cash propping up many of these trophy markets is going to get cut off, and that is the first domino making those trophy markets unaffordable, then trickling down to the secondary markets and making them less affordable. GlobeSt.com: What else should our readers know about home affordability? Blomquist: For the last few years, the trend downward in affordability has been a positive sign of a housing recovery, but we are getting to the point where the affordability scales are tipping too far. That many markets are heading down the path to another bubble if the current pattern of home-price growth far outpacing average wage growth continues.