Lower Income Earners Find New Challenge in Home Affordability

Home prices at the lower end of the market have become affordable than the national average, particularly for those in lower income levels, according to new data from Black Knight Inc.

 

“As prices on Tier 1 properties—those in the lowest 20 percent of home values—have been appreciating at a faster rate than all other tiers for 67 consecutive months,” said Black Knight Data & Analytics Executive Vice President Ben Graboske. “The annual rate of appreciation for these homes is 1.9 percent higher than the market average, and more than 3.6 percent higher than that of properties in the [Tier 5] top 20 percent of prices.”

 

Graboske added that Census Bureau data has determined income growth in the lower quintiles failed to keep with the higher ends of the market, which could be exacerbated as mortgage rates rise.

 

“Overall affordability remains better than long-term historical averages, even taking the recent rate jump into consideration,” he Graboske. “Currently, it takes 23 percent of the median income to purchase the median home nationally, which is still 1.9 percent below the averages seen from 1995-2003. But those in lower income levels are much closer, if not above, such long-term benchmarks. It seems evident that further affordability reductions from rising interest rates could put more pressure on lower-income buyers by increasing competition for lower priced homes, as borrowers’ overall buying power is diminished.”

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