Affordable Housing?

Trulia, an online residential real estate site for home buyers, sellers, renters and real estate professionals, has recently provided data suggesting that rising housing prices are putting America’s largest metropolitan areas out of reach for teachers and first responders.  Trulia’s study defines affordability as a household spending 31% of its monthly income on housing, assuming a 20% down payment and a 30-year fixed-rate mortgage.  The study looked at entire metropolitan areas, not just trendy downtowns, but also at surrounding suburbs.

Trulia based its income data on the median teacher salary, in the area, to determine the percentage of homes that would be affordable.  Not surprisingly, San Francisco won the prize for lack of affordability with less than 1% of the homes in that market falling into the affordability column.  At the other end of the spectrum, Dayton OH, Akron OH, Camden NJ and Detroit MI were very affordable, with more than 75% of housing within reach of the median teacher’s income.

The problem of affordable housing is even greater for service workers and other occupations that typically face pay scales well below those of teachers and first responders.

Investors should note that this is a problem that is not limited to public sector and low income employees.  Private sector employers are also faced with the housing costs for their current and prospective personnel, particularly those that have chosen to locate and/or expand in the San Francisco Bay area.

If people can not afford to live in the communities they serve, they have little choice but to deal with long commutes or change employers.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®