A recent study looked at 130 real estate markets across the United States and found that 61 percent of Charlotte residents can afford entry-level homes in the market.
California-based John Burns Real Estate Consulting’s study defined an entry-level home as one priced 20 percent below the median price for that area. The study’s calculations are based on a 5 percent downpayment on a 30-year, fixed-rate mortgage. Charlotte’s 61 percent is below its historical median of 65 percent.
Overall, an average of 54 percent of Americans could afford an entry-level home utilizing the study’s criteria.
Winston-Salem’s affordability came in at 72 percent, above its historical median of 70 percent. Raleigh-Durham came in at 63 percent, just 1 percentage point below its historical median.
In the Southeast region as a whole, 66.4 percent of residents can afford entry-level homes in their markets.
According to the study, real estate investors are continuing to invest in rental properties, with individual investors beginning to invest in the rental market through companies like Roofstock.
With the Tax Cut and Jobs Act eliminating the tax benefits of home ownership, rental demand is gaining ground. In Charlotte alone, there is a rental market boom with several multi-family real estate projects going up on the Queen City skyline.
Based on the study’s findings, the consulting company concluded this trend will bring positive short-term trends for homeowners and more positive long-term trend for the home rental market. The drop in mortgage rates opens up ownership possibilities for more people, which the consulting company suggests will increase home-buying activity. On the other hand, lack of overall nationwide affordability will push demand toward the rental market, especially in the most expensive markets.
Many home companies are now seizing opportunities to build homes and entire neighborhoods with the rental market in mind, a trend that is now new to the real estate market.
As might be expected, California was the least affordable market for entry-level homes, with only 34 percent of residents in the markets analyzed being able to afford homes. San Francisco and San Jose were the least affordable at 11 percent and 18 percent, respectively.
The most affordable market is Allentown, Penn., where 77.4 percent of residents are able to purchase a home using the study’s criteria.
For the full report, see John Burns Real Estate Consulting’s study.