January 28th, 2019
There seems to always be a balancing act with good news and bad. Today’s good news: the number of homes for sales is increasing nationwide. The bad news? Although inventory is going up, we're finding that the number, as well as the share of affordable homes is decreasing. Many metro areas are showing significant decreases in affordable houses for median income earners. Examples include San Jose and Seattle (both down 12% from 2017), and Los Angeles (down 4%), and San Diego (down 16%).
Causes for this include significant home price gains and rate increases, as well as home builders having been focusing on luxury homes as opposed to starter homes for the past several years. This has left many first-time buyers in a state of limbo. The bottom line: It all comes back to affordability. Because affordability is becoming such a prevalent issue among consumers today, it seems that we're going to start seeing banks and builders adjusting their focus. Banks are going to be pushing more non-QM loans and ARMs, low-DP options will be more popular, and builders will be redirecting their efforts toward more affordable homes.
As a mortgage professional, look at diversifying your product offerings and working with your borrowers on budgeting to help overcome their affordability concerns.