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Sat. Jul 13th, 2024

“55 percent of homes were affordable”

By meerna Jul11,2024
“55 percent of homes were affordable”

First Home Buyers May Have to Head to Memphis for Affordable Housing: '55 Percent of Homes Were Affordable'

First Home Buyers May Have to Head to Memphis for Affordable Housing: ’55 Percent of Homes Were Affordable’

Many Americans are giving up on homeownership, but Memphis is bucking the trend.

In a housing market that has become a nightmare for first-time buyers, Memphis stands out as the only major U.S. city where more than half of homes for sale are affordable to average-income renters, according to a recently released report by First American Financial Corporation.

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The numbers are clear. Nationally, just 29% of homes on the market at the start of 2024 were affordable to the typical renter looking to buy, down from 34% a year earlier. But in Memphis, 55% of homes were affordable to the average renter. The next best markets—Cleveland, Louisville and Pittsburgh—all fell short of 50%.

“At the beginning of the year, we predicted that affordability could end 2024 modestly higher than it ended 2023,” First American Chief Economist Mark Fleming noted in a separate report. Fleming said firm inflation had led the Federal Reserve to a “higher for longer” outlook for interest rates, contributing to a “higher outlook for mortgage rates,” combined with strong broad-based home prices.

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Memphis, however, lacks that common unaffordability. According to Zillow data, as of July 2024, the median home value in Memphis is $152,280, down 2% from the previous year. Nationally, the median home value in May 2024 was $419,300. First American noted that while housing affordability is low for potential first-time homebuyers, Memphis’ “slowing price growth” is increasing its affordability advantage.

The price tag not only attracts first-time buyers but also investors, many of whom are millennials, according to WeAreMemphis, a local news and culture website.

Millennials often can’t afford to own a home in larger markets, but they increasingly see Memphis as an investment opportunity, according to First American. The city’s renter-occupied housing rate is 53 percent, significantly higher than the national average of 34.8 percent.

The high percentage of tenants combined with relatively low purchase prices constitute a convincing argument for potential property owners.

First American’s report identified Memphis, Cleveland and Louisville as areas where first-time millennial homebuyers have the best prospects for homeownership. Its methodology defines an affordable market as one in which the average renter can afford 50% or more of the homes for sale.

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In contrast to Memphis, in Los Angeles, only 1% of homes were affordable to the average renter. San Diego (2%), San Francisco (3%), San Jose (3%) and Sacramento (4%) ranked near the bottom of the list, according to First American. For perspective, in Los Angeles, the average renter had a purchase price of just over $280,000 for a home, while the median sales price was $920,000.

First American’s analysis also found that home prices alone don’t tell the whole story about affordability. Some markets with relatively high median home prices, such as Baltimore and Chicago, were considered more affordable than lower-priced markets, such as Oklahoma City and St. Louis. The key, the report said, is the share of homes for sale that fall within a renter’s purchasing power range.

Looking ahead, First American’s home price index shows that annual home price growth has slowed for five consecutive months, which is good news for would-be first-time homebuyers. “The dream of owning a home is not dead yet,” deputy chief economist Odeta Kushi said in the report.

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This article: First Home Buyers May Have to Head to Memphis for Affordable Housing: “55 Percent of Homes Were Affordable” originally appeared on Benzinga.com

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

By meerna

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