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Affordability Worsening For First-Time Buyers

A new study by NerdWallet found list prices were more than five times the median first-time homebuyers incomes from January to March in 20 of the 50 largest metros.

Also, the number of active listings fell 19% year-over-year from Q1 2019. 

Across the nation, the affordability ratio was 4.5 during Q1 2020—first-time homebuyers could expect to see homes listed at about 4.5 times their income. 

San Francisco has one of the highest average list prices for the quarter ($938,347) but it also has one of the highest median incomes for first-time homebuyers ($131,460).

NerdWallet states just one metro—Pittsburgh—had a quarterly average list price at or below three times the income of first-time homebuyers. Three other metros came in behind Pittsburgh: Buffalo, New York; Cleveland, Ohio; and St. Louis, Missouri, as all list prices were 3.1 times the median income. 

Twenty-eight cities had affordability ratios above the national average (4.5) and 10 had list prices more than six times the local income for potential first-time buyers. 

The Los Angeles-Anaheim-Long Beach metro was found to be the most unaffordable metro in the nation. The average list price for first-time buyers in Los Angeles was $952,656—more than 12 times the average income for a first-time buyer ($77,551). 

San Diego had an affordability ratio of 8.9; San Jose-Sunnyvale-Santa Clara had an affordability ratio of 8, and San Francisco-Oakland-Hayward had an affordability ratio of 7.1.

Also, 39 of the 50 most populated metros across the U.S. saw home prices rise in Q1 2020 by a rate of 4% annually. 

Prices in Houston; Minneapolis; and Louisville, Kentucky, declined the most (4%) over the past year. However, prices rose 10% or more in six areas. Los Angeles saw the biggest gain at 21%. 

The National Association of Realtors (NAR), however, reported first-time buyers were responsible for 36% of sales in April, which is up from 34% in March 2020 and 32% from April 2019. NAR’s 2019 Profile of Home Buyers and Sellers, released in late 2019, found the annual share of first-time buyers was 33% in 2019. 

About Author: Mike Albanese

A graduate of the University of Alabama, Mike Albanese has worked for news publications since 2011 in Texas and Colorado. He has built a portfolio of more than 1,000 articles, covering city government, police and crime, business, sports, and is experienced in crafting engaging features and enterprise pieces. He spent time as the sports editor for the "Pilot Point Post-Signal," and has covered the DFW Metroplex for several years. He has also assisted with sports coverage and editing duties with the "Dallas Morning News" and "Denton Record-Chronicle" over the past several years.
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