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New tool available to measure housing affordability

Photo credit: Special to ACRE

New tool available to measure housing affordability

Industries: Affordable Housing, Residential Real Estate

Markets: Statewide

Housing availability has been an ongoing issue across the United States, and Alabama is no exception.

Income level plays a significant role in determining which houses are affordable to homebuyers, and not every home on the market is available to every prospective homeowner.

Often, lower levels of income, especially in areas where demand is rising, results in upward pressure on prices, which can affect affordability. 

To study this trend nationally, NAR/News Corp. created the Realtors Affordability and Distribution Curve tool. This state-specific tool allows researchers to assess how many homes are available to specific income levels, helping them identify specific issues relating to housing availability and inventory.

Click here to access the interative Realtors Affordability Distribution Curve

According to the National Association of Realtors, this tool combines data from mortgages, state-income levels and property listings on realestate.com. This data allows the tool to accurately project what percentage of people from each income percentile can afford portions of the current housing market. It can be a useful tool for both realtors as well as potential homebuyers.

For example, according to the Realtors Affordability Distribution Curve & Score, Alabamians making just under $50,000 annually can afford 58 percent of the existing real estate inventory in Alabama. Those making just under $75,000 annually can afford 78 percent of the housing inventory in Alabama. Users can manipulate these numbers to determine what percentage of homes are affordable to each income level category.

According to Lawrence Yun, a chief economist at NAR, the most recent complaint for homebuyers is the difference in what they can afford and what is listed for sale.

“This shortfall of inventory at a time of healthy job gains in most states is one of the biggest reasons for the depressed share of first-time buyers and the inability for the homeownership rate to rise above its near-record low," Yun said.

The Realtors Affordability and Distribution Curve attempts to accurately depict this trend, showing an especially large gap at the lower income levels. While the United States as a whole has the entire Affordability and Distribution Curve below the equity line, Alabama’s curve moves above the equity line near the 50th percentile.

The data for this tool will continue to updated on the NAR website and may include metro-level data in the future.

Inventory and Home Prices in Alabama's Five Major Markets (2016)

Birmingham

Inventory down 2.6 percent

Median Sales Price up 4.4 percent

Huntsville

Inventory down13.5 percent

Median Sales Price up 5.9 percent

Mobile

Inventory down 16 percent

Median Sales Price down 3 percent

Montgomery

Inventory down 12 percent

Median Sales Price up 6 percent

Tuscaloosa

Invetory down 15 percent

Median Sales Price up 3 percent

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