Trulia chief economist Jed Kolko comments that in the past year, affordability has fallen modestly. Nationally, 59% of homes for sale are within reach of the middle class, compared with 62% last October. Nonetheless, the big picture is that prices still look undervalued compared with fundamentals and historically low mortgage rates make buying much cheaper than renting. How big a problem is affordability?
Kolko looks at the whys, but more particularly at the wherefores, as in the market and sub-market subtleties of affordability. We learned over the past several years that payment power and relative affordability are much more meaningful terms in home building and development usage. Comparisons to rent trends and benchmarks drawn on the relationship between median house prices and median incomes of the area are models for insight, but not terribly helpful on a predictive basis.
Kolko tries to illuminate affordability trends among millennials as a way to get a handle on buying behavior for the young adult cohort. Have a look.