Buying or renting, housing affordability just gets worse - Diana Olick

Mortgage rates may be hovering near record lows, but it's not enough to counter the sky-high, and still rising, prices in many of the nation's largest housing markets.

Big-city rents have been soaring, but now the outlying areas where residents flee to find affordability are seeing even bigger rent gains, too. For homebuyers, the picture is not much better. A very tight supply of homes for sale is pushing home values higher and pricing potential buyers out, both first-time and move-up buyers.

Big cities have always been expensive, but in a troubling new twist — suburban areas are becoming unaffordable faster than their urban neighbors, according to a new report by Trulia. Brooklyn, New York, is actually seeing a bigger drop in affordable rental listings than Manhattan. The same is true in Oakland, California, compared to San Francisco and Scottsdale, Arizona, compared to Phoenix. Portland, Oregon, and Seattle have seen a big influx of residents fleeing pricey Northern California and are now becoming more unaffordable than the San Francisco Bay area.

This is not to say that rents are decreasing in the big cities though. In San Francisco, about 61 percent of one-bedroom homes are renting for $3,000 or more per month; that is 6 percentage points higher than a year ago, according to Trulia. In the Dallas suburbs of Frisco, Plano and Irving, the share of affordable listings is falling, even as Dallas itself is seeing a slight increase in that share.

Homebuying is not much better. Even with a low down payment, buyers today are shelling out a higher share of their annual income to make that investment, especially first-time buyers. 

While 268,000 borrowers came back into the black in the first quarter of this year, thanks to rising home values, 4 million are still in a negative equity position on their mortgages, owing more than the homes are worth, according to CoreLogic. This, even as home equity rose by a collective $762 billion in the first quarter. It just shows how far the housing market fell, and how much it still has to recover.

"In just the last four years, equity for homeowners with a mortgage has nearly doubled to $6.9 trillion," said Frank Nothaft, chief economist at CoreLogic. "The rapid increase in home equity reflects the improvement in home prices, dwindling distressed borrowers and increased principal repayment. These are all positive factors that will provide support to both household balance sheets and the overall economy." - Read More at the CNBC

Buying or renting, housing affordability just gets worse