Housing affordability crisis does not spare homeowners

“Affordability crisis” is something readers can’t seem to avoid lately in the economy or real estate news section. Recently, an insightful article in Curbed demonstrated how much harder it is for homebuyers to afford a home today compared to Americans in the 1950’s. Apple and Google engineers, whom are well paid, are reported to face challenges affording a home today in the Bay Area with teachers being worse off - able to afford less than 1% of all available homes.  According to ValueInsured’s Q1 2018 Modern Homebuyer Survey, 62% of interested first-time homebuyers – including 65% of Millennials – who plan to buy “in the near future” are concerned they cannot afford a down payment on a home they would like to live in.

But if you think the affordability challenge is exclusive to non-homeowners who wish to enter the elusive homeownership rank, think again. According to ValueInsured’s latest survey on American homebuyers’ confidence and sentiments, even existing homeowners are not immune. The survey found:

  • 22% of all homeowners do not believe they can afford the down payment if they were to sell their current home and buy another home in or near their neighborhood.
  • Among homeowners ages 65 and above – presumably including some who have cumulated more equity in their home – 28% do not believe they can afford the down payment on another home in or near their own neighborhood, even after selling their current home.
  • In rural areas, affordability confidence is even lower, with over 1 in 3 (36%) existing homeowners who do not believe they can afford to sell and buy another home in their own neighborhood.

The affordability concern is highest among existing homeowners of lower-value homes, who may have less home equity to work with if they need the funding to buy another home. Over 4 in 10 (43%) homeowners who own a home they believe to be valued at under $150,000 lack the confidence they can afford the down payment to buy another home in the same neighborhood. 25% of all homeowners with home valued at $150,000 to $250,000 believe the same.

These latest findings are in line with market reports that the housing inventory crunch is partly driven by hesitant sellers who worry they cannot buy another home. This was also well reported in ValueInsured’s Fall 2017 survey. In Seattle, where home inventory is at record low (0.6 month supply in December 2017), 27% of all millennial-aged homeowners and 26% of all Gen-X homeowners in ValueInsured’s latest survey say they lack the confidence that they could afford a down payment on another home in or near their current neighborhood even after selling their existing home at today’s high prices. This underscores what we are faced with today: a housing affordability crisis that not even homeowners – not even those who hold the highly-prized Seattle housing stock – are exempt from.