Despite the increase in supply across many markets, the national supply of affordable homes is down year over year, according to a recent report from Redfin. According to the report, areas such as San Jose, where the median household income is around $117,000, experienced significant declines in affordable homes. Only 14 percent of homes on the market in 2018 in the San Jose metro area were affordable on the median household income.
Los Angeles and Seattle faced similar issues. In Los Angeles, 16 percent of homes for sale were affordable in 2018, down from 20 percent in 2017, while the share of affordable homes in Seattle dropped from 58 percent in 2017 to 46 percent in 2018.
"Homeownership is increasingly out of reach for the typical American," said Redfin Chief Economist Daryl Fairweather. "Over the last few years builders have focused on luxury homes, and there hasn't been enough construction of affordable starter homes."
Even with inventory increasing, many metro areas are still experiencing serious declines in affordability. The San Diego area saw a 10 percent increase in homes for sale in 2018 compared to 2017, while the number of affordable homes fell by 16 percent.
This wasn’t the case in every metro area. According to Redfin, there were a few metro areas where the number of affordable homes for sale increased, including Hartford, CT, Jacksonville, FL and Nashville, TN. Homebuyers may also consider looking in areas such as St. Louis, Minneapolis, and Pittsburgh, where the majority of homes for sale are in the affordable range. Redfin notes that increasing job opportunities and strong wage growth may help buyers in the coming year.
"We expect builders to shift their attention to more affordable homes during 2019," added Fairweather, "which along with rezoning efforts by local governments should reduce this pressure to some degree over time."
Find the full report and charts from Redfin here.