In our last issue, we talked about the likelihood of a housing market correction, as homes — especially in prime coastal areas — are so expensive that many families making the median salary can’t afford to buy one.

The disparity between income and real estate prices only grew more pronounced in the second quarter.

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index, the national median home price rose to $265,000 in Q2 of this year (from $252,000 in Q1). Only 57.1% of new and existing homes sold in Q2 were affordable to families earning the national median income of $71,900 — down from 61.6% in Q1. This is the lowest level studied in the index in since mid-2008.

The median home price in San Francisco, CA, is now $1.1 million, according to the National Association of Realtors. Only 5.5% of homes sold in Q2 were affordable to families earning the area’s median income of $119,600. (In contrast, the NAHB index named Syracuse, NY, the most affordable major housing market, with 89.1% of homes sold in Q2 considered affordable to families earning the area’s median income of $74,100.)

An analysis by CoreLogic found that home-sale prices in 10 of the country’s largest metro areas are within 10 percent of an all-time high. (The firm studied Boston, MA; Chicago, IL; Denver, CO; Houston, TX; Las Vegas, NV; Los Angeles, CA; Miami, FL; New York-New Jersey; Washington, D.C.; and San Francisco.)

“The ongoing supply crunch affecting most of the country worsened for most of the second quarter, as the growing number of interested buyers in many markets overwhelmed what was already a meager level of available listings,” said Lawrence Yun, Chief Economist for the National Association of Realtors. “Homebuilders, facing higher costs and labor shortages, are simply not producing enough affordable homes to satisfy demand.”

How severe is the crunch?

In Q2, there was 4.1 months’ supply of homes on the market (down from 4.2 a year ago); a balanced market holds 6 months’ supply. San Francisco and Denver had inventories of less than 2 months in July.

For now, however, homeowners’ monthly payments remain below record levels thanks to a lower mortgage rate (4.4% in March of 2018 compared to 6.7% in June of 2006). But with rates trending higher, that could change.

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