Asking prices are rising at an especially fast pace in the least affordable housing markets, according to Trulia
Nationally, asking prices increased 9.5 percent year-over-year in May, but in the ten least affordable metros, asking prices spiked 16.3 percent during the same time period.
Trulia also found out of the 100 largest metros, 98 saw asking prices increase over the last year.
Among the least affordable markets, seven were in California. Honolulu was found to be the least affordable metro, where 74 percent of monthly household income is used to pay a mortgage. In San Francisco, households spend 55 percent of their monthly wages on their mortgage. In the 10 least affordable markets, households spent at least a third of their income towards their mortgage. The calculation assumed a 3.8 percent interest rate on a home that is 1800 square feet.
In Oakland California, which ranked as the seventh most unaffordable market, asking prices surged 31.2 percent year-over-year in May. On the other hand, Long Island, which followed at No. 8, saw asking prices rise by just 1.1 percent over the last year. Overall, eight of the least affordable markets saw asking prices increase at a faster rate than the national average.
Among the 10 most affordable metros, asking prices averaged the same rate as the national rate at 9.5 percent. Detroit ranked as the most affordable metro, where just 8 percent of household income is used to pay a mortgage. Detroit, along with Atlanta, Memphis, Fort Worth, and Dallas, all saw year-over-year double-digit gains in asking prices, but they were still among the most affordable metros.
Jed Kolko, Trulia's chief economist, gave two reasons for why the gap in affordability matters.
For one, it leads to a migration out of less affordable markets.
""[M]ore people in expensive markets like California will look to relocate to cheaper markets like Texas when the time comes to buy,"" he said.
He also added that the disparities in affordability make it more difficult to come up with ""one-size-fits-all"" national housing policies as local markets become more different from one another.
National rents were also up, but increased at a much slower annual rate, rising by just 2.3 percent over the last year. Out of the least affordable rental markets, rents are seeing strong yearly gains in Miami (+6.4 percent), Boston (+5.5 percent), and San Diego (+5.1 percent), and New York (+3.7 percent).