Brooklyn comes last in affordability as prices soar
Income fails to catch up as cash-rich investors and buyers drive residents into rental market
One in five housing markets in the United States are now less affordable than their historic average as price gains outpace income growth from New York to San Francisco.
Of the 475 counties analysed by RealtyTrac up to October, 98 areas were not as affordable compared with the average level for the period starting in January 2000, the California-based data company said.
Brooklyn, New York, where a resident would need to devote 98 per cent of the median income to afford the payment on a median-priced home of US$615,000, was the least affordable market, followed by San Francisco and Manhattan.
Investors and foreign buyers have helped drive up home prices in high-cost markets, keeping many residents locked into rentals, where costs also have been rising.
Prices in 20 US cities climbed 4.9 per cent in the year to September, the S&P/Case-Shiller index shows. Across the country, values have gained 25 per cent since their February 2012 bottom.
"Incomes have not grown nearly as fast as home prices" in the regions where affordability declined, said Daren Blomquist, vice-president at RealtyTrac. "That disconnected home price growth has been driven by investors and other cash buyers who aren't as constrained by income."
As a result, many markets were out of reach for traditional buyers, he said.
Los Angeles and Orange County in California and the Houston, Dallas and Boston regions were among the 98 areas where homes were less affordable than the historic average, RealtyTrac said.
The company based its calculations on the median household income required to make a monthly payment for a median-priced home from the beginning of 2000 to October, using a 10 per cent down payment and the average 30-year fixed mortgage rate for each month.
About 12 per cent of the counties studied now have a higher median home price than the peak of the 2005-08 property bubble.
In Brooklyn, the median sale price climbed to a record US$587,515 in the third quarter, according to a report by appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. Values in the borough, where almost 70 per cent of residents rent, have been surging as wealthy New Yorkers priced out of Manhattan displace the poor.
In a deal completed last month, a renovated 1890s townhouse in the Park Slope section sold for US$10.78 million - a record for the neighbourhood and Brooklyn's third-most-expensive purchase, the Curbed real estate blog reported.
The median rent in Brooklyn was US$2,858 in October, up almost 6 per cent from a year earlier, Miller Samuel and Douglas Elliman said.