The combination of record low mortgage rates and millennials aging into homeownership last year translated into speedy house-price appreciation and increased equity for homeowners. But it also meant potential first-time homebuyers struggled to find affordable houses.
Nationally, the house-buying power of the median renter in the fourth quarter of 2020 jumped to $312,000 from $283,000 a year before, according to the latest First American First-Time Homebuyer Outlook Report.
“While house-buying power increased, the share of homes for sale that a median renter could afford shrank nationally, falling to 57 percent in the fourth quarter of 2020, down from 61 percent one year ago,” First American Deputy Chief Economist Odeta Kushi said in a release. “Even though house-buying power increased, house-price appreciation eroded the affordability boost from falling mortgage rates.”
The report examined the most affordable markets for first-time homebuyers, or those that offered the largest share of homes for sale within the median renter’s house-buying power.
“The most affordable city on the list is Oklahoma City, where the median renter could afford 86 percent of the homes for sale,” Kushi said.
The other most affordable first-time homebuyer markets included: Memphis, Tenn.; Louisville, Ky.; Richmond, Va.; Pittsburgh, Pa.; Chicago, Ill.; Buffalo, N.Y.; Raleigh, N.C.; Kansas City, Mo.; and Cincinnati, Ohio.
“By a considerable margin, the least affordable city is Los Angeles, where the median house price in the fourth quarter of 2020 was $737,000, but the median renter’s house-buying power of $373,000 left only 7 percent of the homes sold in Los Angeles actually affordable,” Kushi said.