July 7, 2019

What are buyers supposed to do while waiting on affordable housing fix?


Last month mainstream media turned its attention to a housing inventory and affordability issue that has been percolating for years.

2019 NETAR President

The annual Joint Center for Housing Studies at Harvard’s “The State of the Nation’s Housing” report and Attom Data Solutions’ Second Quarter U.S. Home Affordability Report came down in the same week. The findings had the effect of throwing gasoline on a campfire.

Harvard’s Report is extensive – 44 pages – but the three take-aways were:

  • Most people are spending more of their income on housing.
  • Low-income housing is disappearing.
  • Home ownership is out of reach for many

Attom’s headline was: “Median-Prices Homes Not Affordable for Average Wage Earners in 74 Percent of U.S. Housing Markets.”

A deep dive into Attom’s Q2 data combined with data gathered from the Northeast Tennessee Association of Realtors® (NETAR) reports and Realtors Property Resource© (RPR) paint a better picture than Attom’s U.S. index.

When the local numbers were crunched, it showed the average Sullivan and Washington wage earners had enough buying power for a median-priced home. However, the statistical model was  based on the assumption the buyer earned the median wage, had a 3 percent down payment and a 28 percent front-end debt to income ratio. It also calculated the median price of homes, compared average mortgage payment to the home price to get an affordability position where the buyer was not spending more than 28 percent of his or her income on housing.

The purpose is to set a housing cost benchmark that does not press homeowners into what economists call a housing stress situation. This situation occurs when the cost of housing accounts for 30 percent or more of the owner’s income. 

What the analysis did not take into account was inventory.  Inventory is where a lot of shade is thrown on the otherwise good local affordability status story. It is not comforting to know the average wage earner has the buying power to afford a median-priced home if there are not enough median priced homes to meet demand. We are at or very near that point in the local market.

The National Association of Realtors® Chief Economist Lawrence Yun’s response to the state of the housing market was, “Solid demand along with inadequate inventory of affordable homes has pushed the median price to a new record.” That assessment fits the NETAR market situation like a glove.

Realtors® have grumbled about affordable housing conditions for nearly 40 years.  NAR and the National Association of Homebuilders welcomed the White House’s executive order to ease or eliminate some of the regulator barriers that impede more affordable housing.

The executive order is a longer-term situation.  So, what should buyers and sellers facing today’s market realities do?

First and foremost, they have to be realistic about local market conditions. Then they should get the best professional advice and guidance they can find. The need to partner with a local Realtor® who can customize the available buying power to the realities of the local market and inventory. Affordable homes are out there, but it is  not the buyers’ market that existed here for so long.

Sellers also need a reality check. The median listing price across the 11-county region last month was $200,000. The listing price is  almost 15 percent higher than May last year.  The median sales price was 4.7 percent higher than last year. It also means half of the listing were above and half were below the price point that accounts for about 70 percent of all local existing home sales. The bottom line is strategic pricing and marketing are more important in today’s market than ever before.

NETAR is the voice for real estate in Northeast Tennessee. It’s the largest trade association in Northeast Tennessee, Southwest Virginia region representing over 1,200 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, monthly Trends Reports, and the regional market analytics can be found on the NETAR websites at .