The American dream of home ownership has become drastically less affordable for many working families in Southwest Florida, new figures show.
A trio of reports released this week say the cost of real estate is drifting further out of reach for potential buyers earning median salaries — with general housing expenses rising well beyond stagnant worker wages.
With rents in the area also escalating, families in Sarasota and Manatee counties are now dedicating a greater portion of their earnings to basic housing than what is considered financially stable.
These new measures of the lack of affordability come as a stark turnaround from just three years ago, when home ownership during the Great Recession on a percentage of income basis was among the least expensive in state history.
Housing has recovered regionally faster than the general economy, spurred by strong demand from investors and affluent retirees. Together, those groups have sparked steep price hikes nationwide.
Economists warn the trend could eventually shut out an entire generation of young Americans and disrupt a cycle of move-up purchases that the housing industry depends on for growth.
With median sales prices in Florida projected to increase another 12 percent this year, and mortgage rates also likely to inch upward, experts maintain the affordability gap could widen further in 2014.
“It would be a stretch for someone in Sarasota earning the median income to purchase a median-priced house,” said Frank Nothaft, vice president and chief economist for Freddie Mac.
“If we continue to see housing prices grow in the Sarasota market, and there’s no increase in median income, that’s going to make the affordability pinch even worse.”
Based on an index that measures median home prices against family wages, Southwest Florida is among a growing number of metropolitan areas nationwide where housing has become less affordable.
For the North Port-Sarasota-Bradenton area, 67.8 percent of new and existing homes sold from the start of October through the end of the year were affordable to families earning the region’s median household income of $59,900, according to data released Thursday by the National Association of Home Builders.
That figure was down from 68.8 percent in the third quarter and 75.4 percent in the same three months last year.
The area’s affordability index has steadily fallen since late 2011, and it has slipped to its lowest level since the third quarter of 2009, when the recession was considered to be at its worst.
At the peak of the housing bubble in 2006, housing affordability bottomed-out in Southwest Florida at a mere 25 percent, figures from the trade group show.
The builders’ Housing Opportunity Index is calculated by comparing median sales prices from CoreLogic Inc.; mortgage financing from the Federal Housing Finance Agency; local tax and insurance estimates from American Community Survey; and median family income figures from the Department of Housing and Urban Development.
Forecasters attribute the recent slide to rising home prices, which reached a median of $198,000 at the close of 2013 — an 18 percent jump from 2012 and the region’s highest year-end mark in five years.
The region’s median family income, meanwhile, has held steady at $59,900 since first quarter 2012 and remains down as compared to most of 2009 and 2010.
The recent drop in housing affordability comes amid stiffening mortgage requirements, heavy student debt levels for many young buyers and a shrinking supply of homes priced under $200,000.
With rental rates also climbing, lists for government subsidized housing have become so clogged that officials have instituted a year-long moratorium on new applications.
There are 541 applicants for subsidized one-bedroom unit in Sarasota, for instance, but typically only five openings a year, which combine for a roughly 108-year wait.
“The demand just greatly outweighs supply,” said Bill Russell, executive director of the Sarasota Housing Authority. “All of the units that are below market value are occupied.”
A new measure by federal mortgage backer Freddie Mac is even less bullish on housing affordability than the builder’s index.
Using standard banker underwriting, households can spend a maximum of 28 percent of their gross monthly income on housing to be approved for a new home loan.
That equates to about $1,073 a month, based on U.S. Census wage estimates for the Sarasota market.
With a standard mortgage rate of 4.29 percent, a 10 percent down payment and taxes and insurance calculated at 2.18 percent of the property’s value, the monthly payment for a median-priced, single-family home in the Sarasota area would be $1,302.
That means income requirements are $229 shy of meeting the the necessary monthly payment, according to data Freddie Mac released this week.
Even more ominous, Southwest Florida’s affordability score of 82 ranks the area the 15th worst nationwide, trailing only Miami and Naples in Florida, along with areas like San Francisco, Los Angeles, New York City and Boston, according to Freddie Mac calculations.
The affordability gap has become especially acute among Americans aged 25 to 34 — typical first-time buyers — whose rate of homeownership has slid to its lowest level in two decades, Census studies show.
Jack McCabe, a Florida real estate consultant, contends the trend, if left unchecked, could have widespread ramifications for Florida’s housing market.
McCabe and other analysts note Florida’s employment base is driven largely by lower paying service jobs which, coupled with rising costs for food, gas and clothing, is leaving less and less for housing.
“This is something we all should be very concerned about,” McCabe said. “The vast majority of Floridians can no longer afford a median-priced home, or for that matter, a median-valued apartment. When you have income going down and costs that are exploding, that’s a formula for disaster.”
He also worries the gap could have serious implications for builders and Realtors, too.
“Affordability could be the killer to this housing boom,” McCabe said.
Despite the declines in affordability, owning a house in Southwest Florida remains less expensive than renting.
Renting a three-bedroom home in Sarasota and Manatee counties so far this year costs about $1,355 per month — relatively flat from 2013, according to industry researcher RealtyTrac Inc.
The qualifying income needed to support that rental payment is $48,780 a year — beyond the median household income that RealtyTrac employs and substantially lower than the homebuilder’s income estimate.
That means many families in Southwest Florida, especially those forced to rent because of bruised credit scores, cannot afford to lease a basic three-bedroom house, the report shows.
Affirming the other two studies, RealtyTrac concludes ownership affordability has dropped by about 20 percent in the region as a result of rapid price appreciation.
“It’s a cautionary tale that the market cannot continue at the pace we saw in 2013 — there needs to be a little bit of a reality check,” said Daren Blomquist, a RealtyTrac vice president.
“The way of building wealth for most Americans is buying a home. That whole segment of the market is now disappearing.”
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