Depending on the market, many homebuyers could be priced out of buying a home. The reason? Certain markets are currently suffering an unaffordability crisis, according to Steve Pomeranz, a Certified Financial Planner, in his interview with veteran Real Estate Agent Terry Story.
Examining the Numbers
It all boils down to how much people make when compared to the cost of homes, and unfortunately those statistics just aren’t favorable in roughly 25% of markets across the nation. If wages don’t grow at the same paces as home prices, would-be buyers are simply priced out of being able to purchase a new home. And in some cases, wages are growing in areas where buyers aren’t interested in investing in new homes.
However, Story believes the market will fix itself. According to Story, if enough people sit out the rush due to fears of rising prices, eventually prices will drop. All of this hinges on builders’ abilities to close the home and move onto another, which she believes hasn’t been the case so far.
In fact, potential buyers may not be relocating – and therefore buying – because the places they’re looking simply don’t have enough inventory available. Those wishing to stay in their pricier, more desirable area face a shortage in inventory and are forced to “buy up” – continuing the vicious circle.
Despite the affordability disparity, wages are actually increasing in half of the nation’s markets. Once the functioning free market self-corrects as supply and demand forces change, things could return to normal.
In the meantime, builders should focus on closing their sales and moving on to the next home in order to keep the market moving.