Housing Inventory Growth Doesn’t Guarantee Greater Affordability
![Housing Inventory Growth Doesn’t Guarantee Greater Affordability Housing Inventory Growth Doesn’t Guarantee Greater Affordability](https://i2.wp.com/assets.inman.com/wp-content/uploads/2021/12/daniel_hero-35-1024x576.png?w=780&resize=780,470&ssl=1)
In June, five of the top U.S. markets showed some improvement in housing affordability and supply year-over-year, according to First American’s Real House Price Index, while some markets with improved inventory still struggled with rising costs.
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The housing market has been undersupplied for more than a decade and, alongside increases in housing inventory in a few U.S. markets, mortgage rates and income levels are helping to determine the direction of housing affordability, according to a report from First American Data & Analytics, released on Monday.
In June, only five of the top 50 U.S. markets showed improvement in housing affordability and supply year-over-year: Denver; Tampa, Florida; Portland, Oregon; Austin, Texas; and Raleigh, North Carolina.
According to First American’s Real House Price Index (RHPI), which adjusts prices for purchasing power by considering how income levels and interest rates impact borrowing ability, prices overall decreased 1.3 percent month over month due to lower mortgage rates and positive income growth, while prices increased 3.9 percent year over year.
Median household income was up 3.8 percent year over year, but “was not enough to offset the affordability loss from higher mortgage rates and rising nominal prices,” according to the report.
“While inventory nationally and in most markets is higher than one year ago, it remains low from a historical perspective,” First American chief economist Mark Fleming said. “Nationally, housing supply is nearly 34 [percent] lower compared with June 2019, the summer before the pandemic hit. Nevertheless, as this analysis shows, the faster housing supply increases, the more affordability improves and the strength of a seller’s market wanes.”
Denver’s housing supply grew 28 percent while the real house price decreased 7 percent. Tampa’s inventory grew 62 percent while the real house price decreased 5 percent. Portland’s housing supply grew 20 percent while the real house price decreased 3 percent. Austin’s inventory grew 14 percent while the real house price decreased 2 percent and Raleigh’s inventory grew 30 percent while the real house price decreased 2 percent.
According to the report, some markets saw increases in housing supply that were “quickly absorbed by demand, and fierce market competition continues to fuel robust price appreciation that reduces affordability.”
Cincinnati, Seattle and Memphis, Tennessee, are among those markets that displayed a drop in housing affordability even as inventory improved.
Cincinnati’s inventory grew by 13 percent while affordability decreased 11 percent. Seattle’s inventory grew 25 percent while affordability dropped 9 percent. Memphis’ inventory increased 26 percent while affordability decreased 13 percent.
Email Richelle Hammiel